Devon Energy Financial Model

• Total assets: Approximately $25 billion to $30 billion.
• Key asset categories: Property, plant and equipment (PP&E) dominates the balance sheet, representing proved and unproved oil and gas properties accounted for under the successful efforts method.
• Goodwill & intangibles: Minimal historically, though recent M&A activity introduces some goodwill.
• Working capital profile:
• Days Sales Outstanding (DSO): 30 to 40 days.
• Days Payable Outstanding (DPO): 40 to 50 days.
• Net working capital as % of revenue: Typically negative or near zero.
• Working capital funding: The company operates with negative working capital, meaning payables to suppliers and royalty owners often exceed receivables from purchasers, providing a slight cash flow advantage.
• PP&E: Consists of oil and gas properties, gathering systems, and corporate assets. Depleted over the life of proved developed reserves.
• Right-of-use assets: Operating leases are present for drilling rigs and office space but are not a dominant balance sheet item.

• Capex as % of revenue: Typically 20% to 25%, though highly dependent on the denominator (commodity prices).
• Maintenance vs. growth capex: Approximately 70% to 80% is maintenance capex required to hold production flat against steep shale decline rates, with the remainder allocated to growth.
• Major capex programmes: The 2025 capital programme is estimated at $3.8 billion to $4.0 billion, with over 50% allocated to the Delaware Basin.
• Capitalised software: Immaterial.
• M&A pattern: Transformational acquirer. Devon merged with WPX Energy in 2021, acquired Grayson Mill in 2024, and announced a combination with Coterra Energy in 2026.

• Total debt: Approximately $6 billion to $7 billion historically, fluctuating with M&A funding.
• Debt/EBITDA ratio: Target is below 1.0x at mid-cycle prices.
• Credit rating: Investment grade (BBB tier).
• Key debt instruments: Unsecured senior notes and a syndicated unsecured revolving credit facility.
• Maturity profile: Well-laddered with average maturities exceeding 5 years.
• Interest rate profile: Predominantly fixed-rate senior notes.
• Share repurchase programme: Highly active. The company repurchased $3.3 billion in shares from the programme inception through the end of 2024.
• Dividend policy: The company employs a fixed-plus-variable dividend framework but recently pivoted to emphasising a growing fixed dividend, raising it to $0.24 per share quarterly in 2025.

• Operating cash flow conversion: OCF typically exceeds Net Income significantly due to heavy non-cash DD&A charges.
• Free cash flow margin: Typically 15% to 25% of revenue in mid-cycle pricing environments.
• Major non-cash items: DD&A, deferred income taxes, and non-cash stock-based compensation.
• Working capital cash flow impact: Minor fluctuations quarter-to-quarter, but generally neutral over a full year.
• Capex intensity: High. Upstream capital requirements consume a large portion of operating cash flow.
• Cash tax rate: Often lower than the GAAP effective tax rate due to the immediate deduction of intangible drilling costs (IDCs) for tax purposes.

1. Macro & Assumptions: WTI, Henry Hub, and NGL pricing decks, production volume growth rates, and cost per Boe assumptions.
2. Production & Pricing: Detailed build of volumes (Oil, Gas, NGL) in MBoe/d, realised price calculations including basis differentials, and hedging impacts.
3. Income Statement: Oil, gas and NGL sales; Marketing and midstream revenues; Production expenses; Marketing and midstream expenses; DD&A; G&A; Financing costs.
4. Balance Sheet: PP&E roll-forward, working capital schedules, debt, and equity.
5. Cash Flow Statement: OCF, upstream capital expenditures, free cash flow, dividends paid, and share repurchases.
6. Debt Schedule: Revolver draw/paydown logic, senior notes tranches, and interest expense calculation.
7. Reserves & NAV: Proved reserves roll-forward, standardised measure of discounted future net cash flows, and Net Asset Value (NAV) valuation based on acreage and reserves.
8. DCF Valuation: Unlevered free cash flow calculation, WACC, and terminal value based on a terminal EV/EBITDAX multiple.

1. "Total Production (MBoe/d) = Oil Production (MBbls/d) + (Gas Production (MMcf/d) / 6) + NGL Production (MBbls/d)"
2. "Oil Revenue = Oil Production (MBbls/d) x Days in Period x Realised Oil Price ($/Bbl) x 1,000"
3. "Realised Oil Price = WTI Benchmark Price + Oil Basis Differential"
4. "Production Expenses = Total Production (MBoe/d) x Days in Period x Production Expense Rate ($/Boe) x 1,000"
5. "DD&A Expense = Total Production (MBoe/d) x Days in Period x DD&A Rate ($/Boe) x 1,000"
6. "Marketing and Midstream Margin = Marketing and Midstream Revenues - Marketing and Midstream Expenses"
7. "EBITDAX = Net Earnings + Income Tax Expense + Financing Costs + DD&A + Exploration Expenses"
8. "Free Cash Flow = Operating Cash Flow - Capital Expenditures"
9. "Fixed Dividend Paid = Shares Outstanding x Fixed Dividend per Share"
10. "Variable Dividend Paid = (Free Cash Flow - Fixed Dividend Paid - Share Repurchases) x Variable Payout Ratio"

The Macro & Assumptions sheet dictates the commodity price deck which feeds directly into the Production & Pricing sheet. The Production & Pricing sheet calculates total revenues and feeds the top line of the Income Statement. Total production volumes from this sheet also drive Production Expenses and DD&A on the Income Statement. The Income Statement generates Net Income, which anchors the Cash Flow Statement. The Cash Flow Statement calculates Free Cash Flow, which determines the cash available for debt reduction or shareholder returns on the Debt Schedule. The ending cash and debt balances from the Debt Schedule flow into the Balance Sheet. A circularity risk exists between the Debt Schedule (interest expense) and the Income Statement (net income affecting cash flow and revolver balances).

• Revenues, production volumes, and asset balances are positive.
• Expenses (Production, DD&A, G&A) are entered as positive numbers in their specific build schedules but subtracted in the Income Statement totals.
• Capital expenditures, dividends, and share repurchases are shown as negative values on the Cash Flow Statement to represent outflows.
• Debt paydowns are negative; debt issuances are positive.

• Failing to convert natural gas volumes correctly. The model must divide Mcf by 6 to arrive at Boe.
• Modelling Marketing and Midstream revenues as a high-margin business. These revenues are largely offset by identical expenses and should be modelled as a low-margin pass-through.
• Overestimating unhedged price realisations. The model must apply a negative basis differential to WTI and Henry Hub to reflect actual field-level pricing.
• Ignoring the step-up in production and shares outstanding from the Grayson Mill acquisition in late 2024 and the pending Coterra Energy merger.
• Miscalculating DD&A. It must scale dynamically with production volumes, not as a fixed percentage of revenue.
• Double-counting production taxes. They are often bundled into "Production expenses" in the 10-K but scale with revenue, whereas lease operating expenses scale with volume.
• Assuming straight-line production growth. Shale wells decline rapidly, meaning maintenance capex must be spent just to keep production flat.
• Misinterpreting the dividend policy. The company has shifted focus toward a higher fixed dividend rather than relying heavily on the variable component.

• "Total Production (Boe/d) must exactly equal the sum of Oil, Gas (converted at 6:1), and NGL volumes."
• "Marketing and Midstream Margin should remain near zero (revenues roughly equal expenses)."
• "DD&A per Boe should remain in the $11 to $13 range; flag if it deviates significantly."
• "Production Expenses per Boe should remain in the $11 to $14 range."
• "Free Cash Flow must equal Operating Cash Flow minus Capital Expenditures."
• "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period."
• "Debt/EBITDAX should remain below 1.5x under mid-cycle pricing scenarios."
• "Total dividends paid cannot exceed Free Cash Flow minus share repurchases over a full year."

• Filings: SEC EDGAR for Devon Energy (DVN) 10-K, 10-Q, and 8-K filings.
• Presentations: Devon Energy Investor Relations website for quarterly earnings presentations and guidance tables.
• Peers for benchmarking: EOG Resources (EOG), Diamondback Energy (FANG), Coterra Energy (CTRA), and Permian Resources (PR).
• Industry data: Energy Information Administration (EIA) for macro commodity pricing and inventory data.
• Consensus estimates: FactSet or Bloomberg for forward-looking production and capex consensus.

• Devon Energy Fourth-Quarter and Full-Year 2024 Earnings Release (February 18, 2025)
• Devon Energy 2024 Annual Report on Form 10-K
• Devon Energy Q4 2024 Supplemental Financial Tables
• Devon Energy Investor Presentations (2025/2026)