Devon Energy CEO Clay Gaspar called the first quarter another “strong quarter” for the company as the firm exceeded earnings expectations. But it also fell short on revenue as shares decline 1.6% after the Oklahoma City company announced its report on Tuesday.
Devon reported production averaged 833,000 barrels of oil equivalent a day during the first quarter as its actual oil production reached 387,000 barrels a day which was at the top end of guidance.
Adjusted earnings per share were $1.04, an amount that exceeded analyst consensus of $1.01 by 3 cents. But Devon’s revenue of $3.81 billion also missed analyst estimates of $4.18 billion. It marked a shortfall of approximately $370 million.
Devon’s first quarter operating cash flow was $1.7 billion while free cash flow totaled $816 million during the quarter. The company cited capital investment of $848 million, an amount 6% below the midpoint of guidance. Devon credited effective cost management and time of facility spending.
During the period, Devon also repurchased $69 million in shares.
“Devon delivered another strong quarter, beating guidance across major value drivers, including oil production and capital,” said Clay Gaspar, president and CEO. “Our relentless focus on operational excellence and cost discipline continues to drive significant free cash flow and meaningful returns to shareholders.”
The quarterly report was the last before Devon’s merger with Coterra Energy was to formally take effect on May 7 which was not lost on Gaspar in his announcement of the financial reports.
“We are also on track to achieve a significant milestone with the full delivery of our $1 billion business optimization target well ahead of schedule, further strengthening our future margins and positioning Devon for longterm success as we head into the close of our transformative merger with Coterra.”
KEY FINANCIAL & OPERATIONAL HIGHLIGHTS
• Production Outperformance: Averaged 387,000 barrels of oil production per day in the first quarter, reaching the topend of guidance
• Disciplined Cost Management: Invested $848 million of capital in the first quarter, 6 percent below midpoint guidance
• Business Optimization Success: Projected to reach 100 percent of the $1 billion annual pre-tax free cash flow
improvement target well ahead of schedule, providing a strong foundation ahead of merger close
• Robust Cash Generation: Operations generated $1.7 billion of operating cash flow and $816 million of free cash flow
during the first quarter
• Accelerated Shareholder Returns: Repurchased $69 million of shares during the first quarter. Announced plans for a
new share repurchase authorization in excess of $5 billion and an increase to the quarterly fixed dividend, both following
the closing of the Coterra merger and subject to Board approval
• Merger Progress: Both Devon and Coterra shareholders approved the transformative merger on May 4, 2026, with the
transaction expected to close on or around May 7, 2026
STRATEGIC MERGER WITH COTERRA ENERGY
On Feb. 2, 2026, Devon announced that it had entered into an agreement to combine in an all-stock merger with Coterra Energy.
The combination will create one of the largest shale operators in the world with an asset base anchored by a premier position in the economic core of the Delaware Basin. The go-forward company, to be named Devon Energy, is expected to unlock substantial value for shareholders by leveraging enhanced scale to improve margins, increase free cash flow, and accelerate cash returns through the capture of $1.0 billion in sustainable annual pre-tax synergies, expected to be fully achieved by year-end 2027.
Shareholders of both companies approved the transaction on May 4, 2026, and the merger is expected to close on or around
May 7, 2026. Upon completion of the transaction, Devon shareholders will own approximately 54 percent of the combined
company and Coterra shareholders will own approximately 46 percent of the combined company on a fully diluted basis.
FINANCIAL RESULTS
Devon reported net earnings of $120 million, or $0.19 per diluted share, in the first quarter of 2026. Adjusting for items analysts
typically exclude from estimates, the company’s core earnings were $641 million, or $1.04 per diluted share.
Devon’s operating cash flow totaled $1.7 billion in the first quarter. The company funded its capital requirements and had $816 million in free cash flow for the quarter. At the end of the first quarter, Devon had a cash balance of $1.8 billion and an undrawn credit facility of $3.0 billion. Outstanding debt totaled $8.4 billion and the company’s net debt-to-EBITDAX ratio was 0.9 times.
RETURN OF CAPITAL
Devon has not yet declared a quarterly dividend during the second quarter due to the pending merger with Coterra Energy. Following the closing of the merger and subject to Board approval, the company expects to declare a quarterly dividend for the second quarter of $0.315 per share.
The company returned capital to shareholders through the ongoing execution of its $5.0 billion share repurchase program.
During the first quarter, Devon repurchased shares for $69 million. In connection with the pending merger with Coterra Energy, the company has suspended share repurchasing activity through the expected closing.
Following the closing of the merger with Coterra Energy, the company expects to establish a new share repurchase authorization in excess of $5 billion, subject to Board approval.
OPERATING RESULTS
Devon’s capital activity in the first quarter averaged 19 operated drilling rigs and 6 completion crews across its asset portfolio. This
level of activity resulted in 110 gross operated wells being placed online, with an average lateral length of 10,500 feet. Capital
investment, excluding acquisition capital, was $848 million, or 6 percent below guidance. This positive variance was primarily
attributable to effective cost management and timing of facility spend. The company also completed $151 million in leasehold
acquisitions, primarily in the Delaware Basin, across its portfolio.
Production averaged 833,000 Boe per day in the first quarter, in line with guidance. Oil totaled 387,000 barrels per day in the quarter, which was 46 percent of total volume and at the top-end of the company’s guidance.
Underpinning these results is the continued strong progress in advancing the company’s business optimization plan. With
strong momentum established, the company expects to fully achieve its $1 billion annual pre-tax free cash flow improvement
target well ahead of schedule with the upcoming repayment of the $1 billion term loan. These actions will continue to strengthen margins and maximize capital efficiency across Devon’s assets.
Q2 2026 OUTLOOK
On a Devon standalone basis, production in the second quarter of 2026 is expected to average 851,000 to 868,000 Boe per day
(46 percent oil). Capital spending in the second quarter is expected to be approximately $900 million.
Given the expected closing of the merger with Coterra Energy, the company is not providing full-year 2026 guidance at this
time. Guidance for the combined entity will be provided in mid-June 2026.