Devon Energy Corporation

Company Overview

Business Model: Devon Energy Corporation is an independent energy company primarily engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs). The Company's strategy focuses on delivering competitive shareholder returns through sustainable, capital-efficient cash flow growth, operating excellence, and maintaining financial strength. Key tenets include optimizing capital programs, reducing costs, and enhancing returns.

Market Position: Devon Energy Corporation maintains an advantaged asset portfolio concentrated in onshore U.S. areas, which it believes are competitive in global energy markets. The Company strives to own premier assets capable of generating cash flows in excess of capital and operating requirements, with a deep inventory of opportunities for sustainable production. Its operations are focused on high-margin oil and liquids-rich plays.

Recent Strategic Developments:

• Grayson Mill Acquisition: On September 27, 2024, Devon Energy Corporation completed the acquisition of the Williston Basin business of Grayson Mill for approximately $5.0 billion, consisting of $3.5 billion in cash and approximately 37.3 million shares of Devon Energy Corporation common stock. This acquisition expanded oil production and operating scale, adding a meaningful runway of economic drilling inventory and delivering accretion to earnings and free cash flow.
• Fixed Dividend Increase: In February 2025, Devon Energy Corporation raised its fixed quarterly dividend by 9% to $0.24 per share, effective for the first quarter of 2025.
• Share Repurchase Program Expansion: In July 2024, the Board of Directors expanded the share repurchase program authorization to $5.0 billion, with an expiration date of June 30, 2026.

Geographic Footprint: Devon Energy Corporation's operations are solely focused onshore in the United States. Its core operating areas include:

• Delaware Basin: The largest and most active program, with operations in southeast New Mexico and west Texas. It is the top-funded asset, expected to receive approximately 55% of capital allocation in 2025.
• Rockies: Consists of Williston Basin (eastern Montana and western North Dakota) and Powder River Basin (Wyoming) assets. The Williston Basin was significantly expanded by the Grayson Mill acquisition.
• Eagle Ford: Operations are located in Texas' DeWitt and Karnes counties, providing low-cost access to Gulf Coast pricing.
• Anadarko Basin: Located in western Oklahoma, offering substantial long-term inventory optionality, including a joint venture with Dow.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 80.0% (Calculated as (Total Revenue - Production Expenses - Marketing and Midstream Expenses) / Total Revenue)
• Operating Margin: 23.3% (Calculated as Earnings before income taxes / Total Revenue)
• Net Margin: 18.5% (Calculated as Net Earnings / Total Revenue)

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed as a separate line item. Exploration expenses were $28 million in 2024.
• Capital Expenditures: $3,645 million in 2024.
• Strategic Investments:
  • Acquisition of the Williston Basin business of Grayson Mill for approximately $5.0 billion in 2024.
  • Investment of approximately $117 million in Fervo, a geothermal energy company, in 2024.

Business Segment Analysis

Devon Energy Corporation aggregates its U.S. operating segments into one reporting segment for financial reporting purposes due to the similar nature of these operations. However, operational performance is driven by its core asset areas.

Delaware Basin

Financial Performance:

• Revenue (Oil, Gas, NGL sales): $7,993 million (part of total field-level cash margin calculation, not direct segment revenue)
• Field-level cash margin: $5,197 million ($30.56 per Boe) in 2024, down from $5,359 million ($34.38 per Boe) in 2023.
• Key Growth Drivers: Increased activity, contributing to a 9% increase in combined production (MBoe/d) from 2023 to 2024. Received 252 MMBoe in extensions and discoveries in 2024.
• Capital Allocation: Expected to receive approximately 55% of the Company's capital allocation in 2025.

Product Portfolio:

• Focus on oil-rich Wolfcamp, Bone Spring, Avalon, and Delaware formations.
• Significant inventory of oil and liquids-rich drilling opportunities with multi-zone development potential.

Market Dynamics:

• Largest and most active program in the portfolio.
• Experienced expanded regional gas price differentials in 2024 due to infrastructure constraints.

Rockies

Financial Performance:

• Field-level cash margin: $1,122 million ($28.61 per Boe) in 2024, up from $863 million ($32.19 per Boe) in 2023.
• Key Growth Drivers: Grayson Mill acquisition in Q3 2024 significantly expanded operating position and contributed to a 47% increase in combined production (MBoe/d) from 2023 to 2024. Received 36 MMBoe in extensions and discoveries in 2024.
• Capital Allocation: Will receive additional capital allocation through 2025 for development of newly acquired Grayson Mill assets.

Product Portfolio:

• Williston Basin: Focused on oil-prone Bakken and Three Forks formations. High-margin oil resource generating substantial cash flow.
• Powder River Basin: Focused on emerging oil opportunities in Turner, Parkman, Teapot, and Niobrara formations. Recent drilling success expanded inventory.

Market Dynamics:

• Oil-weighted basins with deep inventory of high-margin opportunities.

Eagle Ford

Financial Performance:

• Field-level cash margin: $1,150 million ($39.72 per Boe) in 2024, up from $1,074 million ($41.71 per Boe) in 2023.
• Key Growth Drivers: Increased activity, contributing to an 11% increase in combined production (MBoe/d) from 2023 to 2024. Received 16 MMBoe in extensions and discoveries in 2024.

Product Portfolio:

• Production leveraged to oil with low-cost access to premium Gulf Coast pricing.

Market Dynamics:

• Located in the economic core of this south Texas play, providing strong operating margins.
• Subsequent to December 31, 2024, Devon Energy Corporation and BPX Energy agreed to dissolve their partnership and divide acreage in the Eagle Ford Blackhawk field.

Anadarko Basin

Financial Performance:

• Field-level cash margin: $464 million ($15.50 per Boe) in 2024, down from $508 million ($16.94 per Boe) in 2023.
• Key Growth Drivers: Stable combined production (MBoe/d) from 2023 to 2024. Received 30 MMBoe in extensions and discoveries in 2024.

Product Portfolio:

• One of the largest developments in the industry, providing substantial long-term inventory optionality.
• Joint venture with Dow to jointly develop a portion of acreage, with a two-rig program as of December 31, 2024.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1,057 million (24.2 million shares) in 2024. Since inception of the $5.0 billion program, approximately 69 million common shares have been repurchased for $3.3 billion, at an average price of $48.46 per share.
• Dividend Payments: $937 million in 2024, comprising $560 million in fixed dividends and $377 million in variable dividends.
• Dividend Yield: Not explicitly stated, but the fixed dividend was raised by 10% to $0.22 per share in Q1 2024, and further to $0.24 per share in Q1 2025.
• Future Capital Return Commitments: The Board of Directors authorized a $5.0 billion share repurchase program expiring June 30, 2026. The fixed dividend for Q1 2025 is expected to total approximately $156 million.

Balance Sheet Position:

• Cash and Equivalents: $811 million as of December 31, 2024.
• Total Debt: $8,883 million as of December 31, 2024.
• Net Cash Position: -$8,072 million (Total Debt - Cash and Equivalents).
• Credit Rating:
  • Standard and Poor’s Financial Services: BBB with a stable outlook.
  • Fitch: BBB+ with a stable outlook.
  • Moody’s Investor Service: Baa2 with a stable outlook.
• Debt Maturity Profile:
  • 2025: $485 million
  • 2026: $1,000 million
  • 2027: $463 million
  • 2028: $325 million
  • 2029: $0 million
  • Thereafter: $6,626 million

Cash Flow Generation:

• Operating Cash Flow: $6,600 million in 2024.
• Free Cash Flow: Not explicitly defined or calculated in the filing, but the Company states it expects to continue generating material amounts of free cash flow for 2025 by spending within cash flow.
• Cash Conversion Metrics: Capital expenditures for 2024 represented approximately 55% of operating cash flow.

Operational Excellence

Production & Service Model: Devon Energy Corporation is an independent energy company focused on the exploration, development, and production of oil, natural gas, and NGLs. The Company emphasizes operating excellence, embracing innovative thinking and technology to operate safely, reliably, and in an environmentally responsible manner. It utilizes a capital-efficient drilling program across its multi-zone development assets. The Company is the operator of approximately 8,132 gross wells.

Supply Chain Architecture: Key Suppliers & Partners:

• Third-party service providers: Engaged for drilling rigs and other related services for developmental and exploratory drilling and facilities construction.
• Midstream processing entities: Utilized for gathering and processing natural gas, and remitting proceeds for NGLs and residue gas.
• Catalyst Midstream Partners, LLC (joint venture with an affiliate of Howard Energy Partners, LLC): Develops oil gathering and natural gas processing infrastructure in the Stateline area of the Delaware Basin. Devon Energy Corporation's production from 50,000 net acres in this area is dedicated to Catalyst through 2038.
• NDB Midstream L.L.C. (Water JV with an affiliate of WaterBridge NDB LLC): Provides increased capacity and flexibility in disposing of produced water in the Delaware Basin and Eagle Ford. Devon Energy Corporation has a water gathering and disposal dedication to the Water JV through 2038.

Facility Network:

• Manufacturing: Not applicable as the Company is an E&P company.
• Research & Development: Not explicitly detailed, but the Company embraces innovative thinking and technology for industry longevity and environmental performance.
• Distribution: Relies on midstream facilities and systems owned and operated by others to process gas and transport oil, gas, and NGLs to downstream markets.

Operational Metrics:

• Total Production (2024): 737 MBoe/d, an increase of 12% year-over-year.
  • Oil: 347 MBbls/d (+8% YoY)
  • Gas: 1,196 MMcf/d (+13% YoY)
  • NGLs: 191 MBbls/d (+18% YoY)
• Productive Wells (as of December 31, 2024): 18,902 gross wells (7,158 net wells).
• Acreage (as of December 31, 2024): 5,030 gross acres (2,370 net acres), with approximately 1.6 million acres held by production. Approximately 15% of total net acres are on federal lands.
• Drilling Activity (2024): 338.0 total net wells completed (290.8 development, 47.2 exploratory). As of December 31, 2024, 402 gross and 194 net wells were in process of drilling, completing, or waiting on completion.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Sells production under both long-term (one year or more) and short-term (less than one year) agreements, with the vast majority sold at variable, or market-sensitive, prices.
• Channel Partners: Utilizes midstream processing entities for natural gas and NGL sales, and may elect to take residue gas and/or NGLs in-kind to market directly.
• Digital Platforms: Not explicitly detailed for sales channels.

Customer Portfolio: Enterprise Customers:

• Customer Concentration: For the year ended December 31, 2024, no single customer accounted for more than 10% of Devon Energy Corporation's sales revenue. For 2023, sales to two customers accounted for approximately 14% and 10% of sales revenue. For 2022, sales to one customer accounted for approximately 15% of sales revenue. The Company believes it has resources to access alternative customers or markets if significant customers discontinue purchases.

Geographic Revenue Distribution:

• Devon Energy Corporation's oil and gas exploration and production activities are solely focused in the U.S. Revenue is generated from its core operating areas: Delaware Basin, Rockies (Williston Basin and Powder River Basin), Eagle Ford, and Anadarko Basin.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The oil and gas industry is capital intensive and characterized by volatile and uncertain commodity prices. It is subject to significant competition for assets, materials, people, and capital. The industry is also heavily influenced by domestic and worldwide supply and demand, geopolitical risks, climate change initiatives, and extensive governmental regulation.

Competitive Positioning Matrix:

Emerging Competitive Threats

• New Entrants/Disruptive Technologies: Climate change incentives and conservation efforts, technological advances affecting energy consumption (e.g., electric vehicles), and the development and adoption of alternative energy sources and technologies (e.g., renewable energy, clean fuels, carbon capture and sequestration) pose threats by potentially reducing demand for carbon-based fuels.
• Regulatory Changes: Increasingly stringent environmental laws and permitting requirements, including those related to methane emissions and GHG, and potential restrictions on federal lands or hydraulic fracturing.
• "Anti-ESG" Sentiment: Heightened scrutiny, reputational risk, lawsuits, or market access restrictions from parties with "anti-ESG" sentiment regarding the Company's ESG initiatives.

Competitive Response Strategy: Devon Energy Corporation's strategy includes maintaining a strong balance sheet and liquidity, pursuing operating excellence, optimizing capital efficiency, and delivering cash returns to shareholders to navigate commodity price cycles and competitive pressures. It also focuses on transparency in ESG reporting and evaluating low-carbon opportunities complementary to its core business.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Volatile Oil, Gas and NGL Prices: Financial condition, results of operations, and property value are highly dependent on commodity prices, which are volatile due to supply/demand, geopolitical risks (Russia-Ukraine, Israel-Gaza, Yemen/Red Sea conflicts), OPEC+ actions, weather, and economic conditions (inflation, interest rates). Mitigation: Systematic hedging of a portion of production through financial derivative instruments (approximately 30% of anticipated 2025 oil and gas production hedged).
• Climate Change and Related Actions: Legislative, regulatory, and market initiatives to reduce GHG emissions (e.g., EPA methane rules, IRA methane fee, SEC climate disclosures, California legislation, EU directives) could restrict operations, delay permitting, increase compliance costs, reduce demand for products, and impair asset value. Mitigation: Established environmental performance targets, investing in emissions reduction capital projects ($100 million in 2024 and anticipated for 2025), and evaluating low-carbon opportunities.
• Estimates of Reserves Uncertainty: Reserve estimates are complex and require significant judgment, subject to revision due to development activity, economic conditions, and production levels, which could adversely affect financial condition and property value. Mitigation: Internal Reserve Evaluation Group led by a qualified Manager of Reserves and Economics, external third-party audits (89% of proved reserves audited in 2024), and Board of Directors' Reserves Committee oversight.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Midstream Capacity Constraints: Reliance on third-party midstream facilities means production can be interrupted or shut in due to various factors (weather, sabotage, accidents, labor issues, infrastructure constraints), requiring curtailment or alternative capacity on less favorable terms. Mitigation: Examining and executing regional basis swap hedges to protect price realizations.
• Competition for Resources: Strong competition for assets, equipment, materials, services, and personnel can lead to rising costs and scarcity, exacerbated by inflation and supply chain disruptions. Mitigation: Mitigating cost inflation through efficiencies from operational scale and leveraging long-standing supplier relationships.
• Operational Hazards: Drilling and production activities involve risks such as unexpected conditions, equipment failures, natural disasters, terrorism, cybersecurity incidents, and environmental hazards, leading to potential losses, liabilities, and increased costs. Mitigation: Comprehensive training, proven best practices, technologies, and tools for safe operations; maintaining comprehensive general liability and other insurance coverage (though not all risks are covered).
• Cybersecurity Incidents: Heavy reliance on information and operational technologies exposes the Company to cyberattacks, potentially leading to data misappropriation, operational disruptions, or system access denial. Mitigation: Corporate information security policy and program, incident response plan, third-party vendor risk assessments, disaster recovery plans, employee training, and regular internal/external system testing. The Audit Committee of the Board of Directors has oversight of cybersecurity risks.

Financial & Regulatory Risks

Market & Financial Risks:

• Counterparty Credit Risk: Exposure to financial loss from hedging arrangements, credit facilities, trade receivables, and joint interest billings, especially during volatile commodity price environments. Mitigation: Hedging instruments placed with investment-grade rated counterparties, requiring collateral under certain conditions, and mechanisms to limit exposure to customer and joint interest owner credit risks.
• Indebtedness and Credit Rating: $8.9 billion total debt as of December 31, 2024, requiring liquidity for debt service and increasing vulnerability to adverse economic conditions. Credit rating downgrades could impact financing access and interest rates. Mitigation: Maintaining a strong balance sheet, adequate liquidity, and financial flexibility; compliance with debt covenants (26.5% debt-to-capitalization ratio vs. 65% limit).
• Ability to Pay Dividends and Repurchase Shares: Subject to Board discretion, financial results, cash requirements, and future prospects. No assurance of continued payments or repurchases at current rates.

Regulatory & Compliance Risks:

• Extensive Governmental Regulation: Operations are subject to federal, state, tribal, and local laws (environmental, safety, land conservation, resource management, taxes), which can change and increase costs, delay permits, or impose restrictions. Mitigation: Striving for substantial compliance with applicable laws and regulations; ongoing engagement with regulatory bodies.
• Federal Lands Regulation: Policy changes regarding leasing, permitting, and development on federal lands (e.g., increased bonding, royalty rates, minimum bids) could adversely impact operations in the Delaware and Powder River Basins.
• Hydraulic Fracturing Regulation: Federal, state, and local regulations (e.g., air emission standards, wastewater discharge, chemical disclosure) could increase compliance costs, delay development, or restrict operations.
• Water Disposal Regulation: Concerns about seismic activity and ground movement related to wastewater disposal in salt-water disposal wells could lead to increased regulation, higher operating expenses, or curtailment of development plans.
• Tax Matters: Changes in tax laws (e.g., IRA's CAMT, Pillar Two framework) or interpretations could significantly increase tax obligations. Regular tax audits may result in material payments or adjustments. Mitigation: Believes tax positions are reasonable and properly supported.
• Legal Proceedings: Involvement in various legal actions (royalty underpayment, environmental violations, climate change claims, legacy operations liabilities) with unpredictable outcomes and potential material losses. Mitigation: Accruing for probable and estimable liabilities; vigorously defending against claims.

Geopolitical & External Risks

Geopolitical Exposure:

• Geopolitical Risks: Conflicts (Russia-Ukraine, Israel-Gaza, Yemen/Red Sea) and political unrest can impact global energy markets, leading to price volatility.
• Trade Relations: Changes in trade policies (tariffs, environmental performance standards, sanctions, export restrictions) can adversely impact business, including depressing prices or limiting market access (e.g., EU fossil fuel import standards).
• Sanctions & Export Controls: Compliance requirements and business limitations due to sanctions on producing countries.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Emissions Reduction: Investing in capital projects directly or indirectly resulting in emissions reduction (approximately $100 million in 2024 and anticipated for 2025).
• Leak Detection and Repair: Expanding leak detection and repair programs and deploying advanced leak detection technologies.
• Facility Optimization: Reducing natural gas flaring, electrifying facilities, and optimizing facility design to minimize leaks and equipment failures.
• Water Conservation: Target to advance recycled water rate by using 90% or more non-freshwater for completions activities in the most active operating areas within the Delaware Basin.
• Geothermal Energy: Investment in Fervo, a company generating energy from geothermal wells, allowing Devon Energy Corporation to exercise significant influence.

Intellectual Property Portfolio:

• Patent Strategy: Not explicitly detailed in the filing.
• Licensing Programs: Not explicitly detailed in the filing.
• IP Litigation: Not explicitly detailed in the filing.

Technology Partnerships:

• Fervo Energy Company: Devon Energy Corporation invested approximately $117 million in Fervo in 2024, a company focused on geothermal energy, and exercises significant influence.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Executive Committee and Compensation Committee of the Board routinely engage in discussions regarding human capital strategies, outcomes, and activities.

Board Composition: The Board of Directors has a Governance, Environmental, and Public Policy Committee that frequently reviews environmental initiatives and EHS oversight. A Reserves Committee, consisting of four independent members, provides oversight of the reserves process, with members possessing relevant skills and backgrounds. The full Board of Directors receives regular updates on cybersecurity from management and the Audit Committee.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 2,300 employees as of December 31, 2024.
• Geographic Distribution: All employees are located in the U.S.
• Skill Mix: Workforce is central to long-term success, with a focus on expertise and positive contributions from every employee.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Seeks to hire individuals who share core values of integrity, relationships, courage, and results.
• Retention Metrics: Not explicitly stated, but competitive compensation and benefits (annual bonuses, 401(k) with up to 14% Company contribution, stock awards for all employees, comprehensive health benefits, maternity/parental leave, flexible work options) are provided to contribute to strong productivity, low absenteeism, and high retention rates.
• Employee Value Proposition: Focus on providing fulfilling careers, meaningful benefits, and a sense of belonging and inclusion.

Diversity & Development:

• Diversity Metrics: Strives to bring a range of thoughts, experiences, and points of view to problem-solving and decision-making.
• Development Programs: Develops employees' knowledge and creativity through ongoing performance, training, and development conversations.
• Culture & Engagement: Fosters a culture of integrity, accountability, perseverance, and passion for business. Invests in community partnerships focusing on social services, environment, emergency response, arts, culture, and STEM education. Since 2019, opened 188 STEM centers in elementary and middle schools in operating areas.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Established environmental performance targets for meaningful emissions reductions and a goal of net zero GHG emissions for Scopes 1 and 2, calculated from a 2019 baseline.
• Carbon Neutrality: Pursuing a goal of net zero GHG emissions for Scopes 1 and 2.
• Renewable Energy: Electrifying facilities to reduce natural gas and diesel consumption onsite.
• Investment: Spent approximately $100 million in 2024 on capital projects directly or indirectly resulting in emissions reduction, with similar spending anticipated for 2025.

Supply Chain Sustainability:

• Supplier Engagement: Interacting with the value chain on overall environmental goals.

Social Impact Initiatives:

• Community Investment: Actively involved in communities, investing in social services, environment and conservation, emergency response and preparedness, arts and culture, and STEM education.
• Product Impact: Focused on producing reliable, affordable, and accessible energy responsibly.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Not explicitly detailed, but commodity prices are influenced by weather conditions.
• Economic Sensitivity: Cash flow is highly dependent on volatile and uncertain commodity prices, which are influenced by regional and worldwide economic activity, inflationary pressures, and interest rates.
• Industry Cycles: The Company pursues its strategy throughout all commodity price cycles, aiming for sustainable, capital-efficient cash flow growth.

Planning & Forecasting:

• Commodity Price Protection: Approximately 30% of anticipated 2025 oil and gas production is hedged to mitigate volatility. The Company also examines and executes regional basis swap hedges to protect price realizations.
• Capital Planning: 2025 capital program is expected to be approximately $3.8 billion to $4.0 billion, an increase of 7% from 2024, primarily due to the Grayson Mill acquisition. The majority (approximately 55%) of 2025 capital is focused on the Delaware Basin.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Exploration and Production: Operations are subject to federal, state, tribal, and local laws regarding seismic data acquisition, well design/drilling/casing, hydraulic fracturing, production gathering/transportation, spill prevention, emissions/discharge permitting, fluid/material use/disposal, surface restoration, royalty payments, well abandonment, and endangered species.
• Conservation Regulations: Subject to regulations on drilling unit size, well density, production rates, and unitization/pooling, which can impact development plans.
• Federal Lands: Leases granted or approved by the federal government (BLM, Bureau of Indian Affairs) require compliance with detailed federal regulations and orders. Permitting can be subject to delays and challenges.
• EHS Regulations: Subject to federal, state, tribal, and local laws concerning occupational safety, health, environmental protection, and natural resources (e.g., pollutant discharge, waste disposal, GHG emissions, site remediation, pipeline monitoring, species protection).

Trade & Export Controls:

• Export Restrictions: Governmental interventions in energy markets, such as export restrictions, can adversely impact business.
• Sanctions Compliance: Compliance with economic sanctions, including embargoes on producing countries, is required.

Legal Proceedings:

• Royalty Matters: Involved in various lawsuits and governmental agency proceedings alleging royalty underpayments, improper deductions, untimely payments, and improper measurement techniques. Accrued approximately $70 million in other current liabilities for royalty matters as of December 31, 2024.
• Environmental Matters: Received Notices of Violation (NOVs) from the EPA and New Mexico Environment Department (NMED) related to alleged air emission and permit violations in North Dakota, western Texas, and New Mexico. Negotiations are ongoing, and resolution may result in significant fines or penalties.
• Climate Change Litigation: Named as a defendant in legal proceedings by the State of Delaware and various parishes in Louisiana alleging impacts of climate change and seeking monetary damages or remediation. Devon Energy Corporation denies allegations and intends to vigorously defend.
• Other Indemnifications and Legacy Matters: Has indemnified purchasers of divested businesses/assets and may be required to perform or fund decommissioning obligations (e.g., East Bay Field) for former operations or predecessor entities if current operators are unable to satisfy them.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas:

• Environmental Performance: Embraces innovative thinking and technology to improve environmental footprint, including advanced leak detection technologies and facility electrification.
• Low-Carbon Opportunities: Evaluating and selectively investing in low-carbon opportunities complementary to its core business, such as geothermal energy.

Intellectual Property Portfolio:

• Patent Strategy: Not explicitly detailed in the filing.
• Licensing Programs: Not explicitly detailed in the filing.
• IP Litigation: Not explicitly detailed in the filing.

Technology Partnerships:

• Fervo Energy Company: Devon Energy Corporation invested approximately $117 million in Fervo in 2024, a company that generates energy from geothermal wells, and has significant influence over it.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Executive Committee and Compensation Committee of the Board routinely engage in discussions regarding a wide range of human capital strategies, outcomes, and activities.

Board Composition: The Board of Directors and its Governance, Environmental, and Public Policy Committee frequently review environmental initiatives. The Board also has a Reserves Committee composed of four independent members with relevant skills and backgrounds for reserves estimation. The Audit Committee has oversight of cybersecurity risks and receives quarterly updates from management.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 2,300 employees as of December 31, 2024.
• Geographic Distribution: All employees are located in the U.S.
• Skill Mix: Workforce is central to long-term success, with a focus on expertise and positive contributions.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Seeks to hire individuals who share and demonstrate core values of integrity, relationships, courage, and results.
• Retention Metrics: Not explicitly stated, but competitive compensation and benefits are provided to contribute to strong productivity, low absenteeism, and high retention rates.
• Employee Value Proposition: Focuses on providing fulfilling careers, meaningful benefits and compensation, and a sense of belonging and inclusion. Benefits include annual bonuses, a 401(k) savings plan with up to 14% Company contribution, stock awards for all employees, comprehensive health care coverage (with suspended employee premiums), health savings and dependent-care flexible spending accounts, maternity and parental leave, adoption assistance, alternate work schedules, flexible work hours, part-time work options, and telecommuting support.

Diversity & Development:

• Diversity Metrics: Strives to bring a range of thoughts, experiences, and points of view to problem-solving and decision-making.
• Development Programs: Develops employees' knowledge and creativity and advances continual learning and career development through ongoing performance, training, and development conversations.
• Culture & Engagement: Emphasizes integrity, accountability, perseverance, and a passion for building the business. Encourages employee involvement in shaping culture.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Established environmental performance targets to achieve meaningful emissions reductions and pursue a goal of net zero GHG emissions for Scopes 1 and 2, calculated from a 2019 baseline.
• Carbon Neutrality: Actively pursuing a goal of net zero GHG emissions for Scopes 1 and 2.
• Renewable Energy: Emissions reduction strategy includes electrifying facilities to reduce natural gas and diesel consumption onsite.
• Investment: Spent approximately $100 million in 2024 on capital projects directly or indirectly resulting in emissions reduction, and anticipates spending approximately $100 million in 2025.

Supply Chain Sustainability:

• Supplier Engagement: Focused on conserving and reusing water and interacting with its value chain on overall environmental goals.
• Responsible Sourcing: Not explicitly detailed in the filing.

Social Impact Initiatives:

• Community Investment: Strives to be good stewards in operating communities, actively involved and applying its culture of operating excellence. Invests in community partnerships focusing on social services, environment and conservation, emergency response and preparedness, arts and culture, and STEM education.
• Product Impact: Focused on producing reliable, affordable, and accessible energy that the world needs, while finding ways to produce and deliver it more responsibly.
• STEM Education: Since 2019, Devon Energy Corporation has created 188 STEM centers throughout elementary and middle schools in its operating areas, providing state-of-the-art STEM tools and resources.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Not explicitly detailed, but commodity prices are influenced by weather conditions, which can impact demand (e.g., warmer winters reducing heating demand).
• Economic Sensitivity: The Company's cash flow is highly dependent on volatile and uncertain commodity prices, which are influenced by regional and worldwide economic activity, inflationary pressures, and fluctuations in interest rates.
• Industry Cycles: The Company's business strategy is pursued throughout all commodity price cycles, with a focus on delivering sustainable, capital-efficient cash flow growth.

Planning & Forecasting:

• Demand Forecasting Approach: Not explicitly detailed, but the Company's operating cash flow forecasts are sensitive to commodity prices and include a measure of uncertainty.
• Inventory Management: Not explicitly detailed.
• Capacity Planning: Not explicitly detailed, but the Company's capital investment program is driven by a disciplined allocation process focused on moderating production growth and maximizing returns.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Exploration and Production Regulation: Operations are subject to extensive federal, state, tribal, and local laws and regulations covering seismic data acquisition, well design, drilling, casing, hydraulic fracturing, production gathering and transportation, spill prevention, emissions and discharge permitting, use and disposal of fluids and materials, surface usage and restoration, royalty payments, well plugging and abandonment, and endangered species.
• Conservation Regulations: Subject to regulations on drilling and spacing units, well density, production rates, and unitization/pooling, which can impact exploration and development plans.
• Federal Lands Regulation: Leases on federal and Indian lands require compliance with detailed federal regulations and orders. The permitting process can be subject to delays and challenges.
• EHS Regulations: Subject to federal, state, tribal, and local laws concerning occupational safety and health, discharge of materials into the environment, and protection of natural resources. Compliance costs are increasing due to increasingly stringent laws and permitting requirements.

Trade & Export Controls:

• Export Restrictions: Governmental interventions in energy markets, such as restricting exports, can adversely impact the business.
• Sanctions Compliance: Compliance with economic sanctions, including embargoes on producing countries, is required.

Legal Proceedings:

• Material Litigation: Involved in various legal proceedings incidental to its business, including royalty underpayment claims, environmental law violations, and claims for alleged environmental damages or remediation obligations.
• Regulatory Investigations: Received Notices of Violation (NOVs) from the EPA and New Mexico Environment Department (NMED) related to alleged air emission and permit violations. These matters are ongoing, and resolution may result in significant fines or penalties.
• Settlement Exposures: Accrued approximately $70 million in other current liabilities for royalty matters as of December 31, 2024. The Company cannot predict the ultimate outcome of certain environmental and climate change litigation, or the potential loss associated with legacy decommissioning obligations (e.g., East Bay Field).

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 21% in 2024, 18% in 2023, and 22% in 2022.
• Geographic Tax Planning: Subject to U.S. federal income tax as well as income, capital, and other taxes in various U.S. state and foreign jurisdictions.
• Tax Reform Impact: The Inflation Reduction Act of 2022 (IRA) included a 15% corporate alternative minimum tax (CAMT). The Organization for Economic Co-operation and Development's "Pillar Two" framework imposes a global minimum corporate tax rate of 15% on certain multinational enterprises. The Company is assessing the potential impacts of these changes, which could be significant.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Maintains comprehensive general liability insurance, as well as coverage against certain losses from physical damages, loss of well control, business interruption, and sudden/accidental pollution events. Also maintains workers’ compensation and employer’s liability insurance.
• Risk Transfer Mechanisms: Utilizes various derivative financial instruments (financial price swaps, basis swaps, costless price collars) to hedge a portion of its production against commodity price volatility. These instruments are placed with investment-grade rated counterparties.
• Uninsured Risks: Insurance coverage does not provide 100% reimbursement for all potential losses and has limited or no coverage for gradual pollution events, war and political risks, and governmental fines/penalties. The occurrence of a significant uninsured event could adversely affect profitability, financial condition, and liquidity.