# Devon Energy (DVN) Financial Model Free Excel 3-statement financial model and company analysis for Devon Energy. - Canonical: https://finamodel.com/companies/devon-energy - Industry: Oil and Gas - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/DVN.xlsx ## Model Purpose This model provides a comprehensive equity valuation and commodity price scenario analysis for Devon Energy, enabling an analyst to forecast free cash flow generation, assess the sustainability of its dividend framework, and evaluate the pro-forma impact of recent acquisitions. ## Company Overview Devon Energy Corporation is a leading independent oil and natural gas exploration and production company focused entirely on onshore operations in the United States. The company operates a multi-basin portfolio with its premier and most capital-intensive acreage located in the Delaware Basin, supplemented by positions in the Eagle Ford, Anadarko, Powder River, and Williston basins. Business segments include Oil, Gas and NGL Sales (approximately 70% of total revenues) and Marketing and Midstream Revenues (approximately 30% of total revenues). All revenue is generated within the United States. The business model is highly asset-heavy and capital-intensive, relying on continuous drilling and completion activities to offset natural production declines. Devon holds a strong competitive position as one of the largest independent shale producers, competing directly with peers like EOG Resources and Diamondback Energy. Recent major events include the late 2024 acquisition of Grayson Mill Energy, which significantly expanded its Williston Basin footprint, and the early 2026 announcement of a definitive agreement to merge with Coterra Energy to create a premier shale operator. ## Revenue Deep Dive ### Oil, Gas and NGL Sales - **Segment name:** Oil, gas and NGL sales - **Revenue driver formula:** (Oil Volume x Realised Oil Price) + (Gas Volume x Realised Gas Price) + (NGL Volume x Realised NGL Price) - **Historical growth rate:** Highly volatile due to commodity prices; production volumes have grown at a 3-5% CAGR organically, supplemented by M&A. - **Key growth levers and headwinds:** Drilling efficiency, well productivity, and acreage acquisitions drive volume growth, while natural reservoir decline rates and supply chain bottlenecks act as headwinds. - **Pricing dynamics:** Spot pricing tied to WTI (oil) and Henry Hub (gas), adjusted for regional basis differentials and transportation costs. - **Revenue recognition notes:** Recognised at the point in time when control of the product transfers to the customer at the delivery point. - **Seasonality:** Minimal seasonality in production, though extreme winter weather in the US can occasionally cause temporary freeze-offs and production shut-ins. ### Marketing and Midstream Revenues - **Segment name:** Marketing and midstream revenues - **Revenue driver formula:** Midstream Volumes x Gathering/Processing Fee + Marketing Margin - **Historical growth rate:** Fluctuates with total production volumes and commodity prices. - **Key growth levers and headwinds:** Driven by the volume of Devon's own production and third-party volumes flowing through its infrastructure. - **Pricing dynamics:** Contractual fee-based gathering and processing, plus marketing arrangements that fluctuate with market prices. - **Revenue recognition notes:** Recognised when services are rendered or physical delivery of purchased commodities occurs. - **Seasonality:** Generally tracks production volumes with no distinct seasonal pattern. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Production expenses (lease operating expenses, gathering, processing, and transportation, and production/severance taxes). - **Gross margin range:** The company does not report a traditional gross margin. Field-level cash margins typically range from $30 to $40 per Boe depending on WTI prices. - **Key input costs and commodity exposures:** Steel (tubulars), pressure pumping services, sand, water disposal, and labour. - **How COGS scales with revenue:** Production taxes scale linearly with revenue. Lease operating expenses scale with production volumes rather than revenue, creating significant operating leverage when commodity prices rise. ### Operating Expenses - **Marketing and midstream expenses:** These largely mirror marketing and midstream revenues, acting as a pass-through for purchased commodities. - **Depreciation, depletion and amortisation (DD&A):** Typically $11 to $13 per Boe. Calculated using the unit-of-production method based on proved reserves. - **General and administrative expenses (G&A):** Approximately $500 million annually. Largely headcount-driven and relatively fixed. - **Exploration expenses:** Minimal (under $50 million annually) because Devon focuses on developing known unconventional resources rather than wildcat exploration. - **Restructuring / one-time charges:** Infrequent, though integration costs spike following major acquisitions like Grayson Mill. ### Margin Profile - **EBITDAX margin:** Typically 45% to 55% of total revenues, highly dependent on the commodity cycle. - **Margin trend:** Expanding during periods of capital discipline and rising oil prices, compressing during inflationary periods for oilfield services. ## Balance Sheet Structure - **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. ## Capital Expenditure & Investment - **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. ## Debt & Capital Structure - **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. ## Cash Flow Characteristics - **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. ## Sheet Structure 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. ## Key Financial Relationships 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" ## Cross-Sheet Dependencies 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). ## Sign Convention - 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. ## Things Most Likely to Go Wrong - 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. ## Validation Checks - "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." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | WTI Oil Price | 75.00 | $/Bbl | Mid-cycle baseline assumption for valuation | | Henry Hub Gas Price | 2.50 | $/MMBtu | Mid-cycle baseline assumption for valuation | | Total Production | 815 | MBoe/d | Midpoint of 2025 guidance (805-825 MBoe/d) | | Oil Production | 383 | MBbls/d | Midpoint of 2025 guidance (380-386 MBbls/d) | | Oil Price Differential | (3.00) | $/Bbl | Historical average discount to WTI | | Production Expense Rate | 12.50 | $/Boe | Based on recent historical averages | | DD&A Rate | 12.00 | $/Boe | Based on 2024 actuals | | G&A Expense | 500 | $ Millions | Based on 2024 run-rate | | Capital Expenditures | 3,900 | $ Millions | Midpoint of 2025 guidance ($3.8B - $4.0B) | | Fixed Dividend | 0.24 | $/Share | Q1 2025 declared quarterly rate | | Effective Tax Rate | 22.0 | % | Historical statutory and effective average | | WACC | 10.0 | % | Standard discount rate for onshore E&P | | Terminal EV/EBITDAX | 5.0 | x | Standard multiple for mature shale producers | ## Data Sources & Benchmarks - **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. ## Sources - 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) --- ## Frequently asked questions ### What is Devon Energy's primary business focus? Devon Energy Corporation is a leading independent oil and natural gas exploration and production company, focused entirely on onshore operations within the United States. It operates a multi-basin portfolio, with its most capital-intensive acreage in the Delaware Basin, complemented by positions in other key shale plays. ### How does Devon Energy generate its revenue? Devon Energy generates approximately 70% of its total revenues from Oil, Gas, and NGL Sales. The remaining 30% comes from Marketing and Midstream Revenues, with all revenue generated within the United States. ### What is Devon Energy's typical capital expenditure as a percentage of revenue? Devon Energy's capital expenditure typically ranges from 20% to 25% of its revenue, though this percentage can fluctuate based on commodity prices. A significant portion, approximately 70% to 80%, is dedicated to maintenance capex to offset natural production declines. ### What major strategic moves has Devon Energy made recently to drive growth? Devon Energy has been a transformational acquirer, merging with WPX Energy in 2021 and acquiring Grayson Mill Energy in late 2024. The company also announced a definitive agreement to merge with Coterra Energy in early 2026, aiming to create a premier shale operator. ### What is the purpose of the financial model available for Devon Energy? The financial model for Devon Energy provides a comprehensive equity valuation and commodity price scenario analysis. It enables analysts to forecast free cash flow generation, assess dividend sustainability, and evaluate the pro-forma impact of recent acquisitions. ### Where can I find a financial model for Devon Energy to analyze its future performance? A downloadable Excel model is available for Devon Energy, which forecasts financial performance from FY2026 through FY2030. This general corporate model allows for detailed analysis of the company's future financial outlook. [Interactive forecast calculator](https://finamodel.com/companies/devon-energy/forecast)