Devon Energy (DVN) Q3 2026 earnings review
Devon raises savings goal, but buybacks depend on oil prices
Devon, an oil and gas producer, plans more oil on less spending, while its output sat low in its range. In its first full quarter after merging with Coterra, Devon's sales rose 12% against both companies' figures a year earlier. Chief executive Clay Gaspar agreed to sell the Eagle Ford field in Texas. Even without it, his 2027 plan adds up to 3% more oil on lower spending.
| Sales, against both companies combined a year ago | $6.86 billion +12% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.42 $1.04 a year ago |
| Merger savings expected by December | $350 million a year $200 million in the August plan |
| 2027 outlook | New: oil up 1–3% on about $5.3 billion of spending, against $5.9 billion this year |
⚖️ Verdict: 🟢 Bullish
The story got better, because two standing worries eased: Devon raised its merger savings target, and the price it got for its gas recovered. One caution: Devon's 2027 cash plan assumes oil near $80 a barrel. It has hedged only about a third of next year's oil.
The question now is whether the 2027 plan works if oil falls toward $60. Either longer wells and merger savings keep spending down and buybacks large, or a weaker price cuts the spare cash behind them. February's full 2027 plan will tell.
🐂 Bull Case
Devon Doubled Buybacks and Plans $1 Billion Next
In May, Devon’s board approved an $8 billion programme to buy back the company’s own shares. The oil and gas producer spent $414 million on buybacks in the third quarter, about double the second.
Finance chief Shane Young expects over $1 billion in the fourth quarter, with a further step up once the sale of its Eagle Ford field in south Texas brings in cash. The share count slipped 0.8% in the quarter.
But Devon had used about $725 million of the programme by the end of October, so October added only about $108 million by our math. Young said he “cannot wait to be out of our blackout period”.
What to watch: the fourth-quarter buyback total in February. Reaching $1 billion needs nearly $900 million in November and December, and a total that size would show Devon spends its spare cash as promised.
Longer Wells Cut Devon's 2027 Spending
Devon’s first plan for 2027 pumps 1–3% more oil than this year, leaving out the Eagle Ford, a south Texas field it is selling. By our math, spending on the same assets falls by about a tenth, based on figures from finance chief Shane Young.
Longer laterals, the horizontal part of a well, cost less per foot. The plan for the Permian, the oil field of West Texas and New Mexico, puts a four-mile lateral at $630 per foot. The producer plans 53 such wells next year.
It is also scaling up surfactants, a chemical pumped with the fracking fluid to free more oil, to over 200 wells next year. In a first trial, treated wells yielded 18% more oil per foot than untreated neighbours.
This matters because the figure rests on today’s costs: Devon’s presentation says it “assumes no incremental inflation”. It also leaves out about $500 million of land buying planned for next year, so total cash spending will run higher.
What to watch: total spending in the full 2027 plan in February. A figure near $5.3 billion for the same oil would confirm that the cost per foot keeps falling.
🐻 Bear Case
Devon's 2027 Cash Plan Assumes $80 Oil
Devon’s spare cash, and so its buybacks, depend on oil and gas prices. Its 2027 plan shows about $12 billion of operating cash flow, at futures prices near $80 a barrel for US crude.
Finance chief Shane Young said Devon “didn't lean into low single-digit growth strategy because oil price was higher”. He added that the plan holds “Down to $60, $70 a barrel”. That claim covers the drilling, not the buybacks. The producer has hedged only about 35% of next year’s oil.
Gas improved. Devon received 66% of Henry Hub, the US benchmark gas price, up from 12% in the second quarter. The release credits new pipelines out of the Permian in West Texas, which “narrowed Waha differentials”, the discount at the region’s trading hub.
The quarterly filing adds a second cause: a full quarter of gas from Coterra, the rival Devon merged with in May, “which shifted our gas mix away from the Permian”. Yet Devon has hedged only about 10% of next year’s gas.
What to watch: the oil price behind the full 2027 plan in February, and the buyback figure tied to it. A plan that still funds large buybacks at $60 oil would answer this concern.
Merger Savings Still Show Up Mostly as Forecasts
Devon promised at least $1 billion a year of savings from its merger with rival producer Coterra by the end of 2027. The release now says “Merger integration is running ahead of plan”. It expects a yearly pace of $350 million by December, against $200 million in August.
But the quarterly filing credits volume for the main cost gain. Devon wrote that overhead per barrel fell because “increased production volumes drove Boe growth at a faster rate than the corresponding increase in G&A”. In dollars, overhead rose 3% from the second quarter and took about 2.6% of revenue by our math, the same as a year earlier.
What to watch: overhead and field operating costs in dollars in the February results, set against output. Dollar costs that drop while output holds would put the savings in the accounts, not just in the plan.
Taxes and Adjustments Cut Eagle Ford Proceeds
After the merger, chief executive Clay Gaspar reviewed every field. The review ended with one sale: the Eagle Ford, a south Texas oil field, to Crescent Energy for $4.2 billion. Gaspar said “The market valued the asset meaningfully above our internal view”.
Devon expects about $3.5 billion after taxes and adjustments for earnings since the deal’s start date. By our math, about a sixth of the price never reaches it. The field also supplies about 7% of this year’s combined oil.
The review is complete, but Gaspar said “this in no way means you shall never see another opportunity”, so Devon could still sell other fields.
What to watch: the closing, expected in early 2027 and still awaiting regulatory approval. The proceeds fund debt repayment and buybacks, so any hold-up would postpone both.
Risks this quarter didn't answer
Four standing concerns got no decisive new numbers in this quarter’s release, filing or call, so each still waits for a specific disclosure that would move it.
- New Mexico federal land, bought for $2.6 billion in June: chief executive Clay Gaspar expects the “first wells around midyear” 2027, and their early output will show the return.
- Service costs: the 2027 spending figure assumes no inflation; cost per foot in the full plan in February will show whether that holds.
- Taxes: current tax ran at 22% of pre-tax profit against a 15–17% range, with no explanation; the full-year rate in February will show whether it persists.
- Legacy claims: Canada’s tax agency may require “material cash deposits”, and Devon is still negotiating a North Dakota pollution settlement; any disclosed amount would move this risk.
💲 Other KPIs
Leverage fell back to 0.9 times yearly cash earnings before interest, tax and exploration costs, from 1.2 times in June. Devon repaid its last $750 million term loan in July. It expects about 0.6 times by December and gross debt near $9 billion in early 2027, ahead of its earlier end-2027 timing.
The producer put 43% of its operating cash flow back into wells, the same as in the second quarter and below 55% in 2025. It expects about 38% in the fourth quarter. Its longer-term range is 45–60%, so the current rate leaves unusually large spare cash for buybacks and debt.
Working capital, the money tied up in bills and payments, absorbed $657 million of cash, against $62 million a year earlier. Receivables, money owed by customers and partners, took $384 million of it. Before those swings, operating cash flow reached about $3.5 billion, so the gap with the reported $2.8 billion looks like timing.
🔮 Guidance
Held. The plan keeps fourth-quarter oil output level with the third quarter’s 553,000 barrels a day. By our math, the full-year range already left about 555,000 for the fourth quarter. So the new range adds no growth, and it still counts the Eagle Ford until the sale closes.
New. The plan puts total output, counting gas by its energy content, about 1% above the third quarter at the middle of the range. By our math, the full-year range pointed to about 1.65 million, so this sits in its upper half.
Raised. Spending drops about 10% from the third quarter at the middle of the range. But by our math, the second half now totals about $2.84 billion, above the range Devon set in August for those six months.
Unchanged. The yearly average counts legacy Devon alone until the merger closed in May, which is why it sits well below the current rate. Nine months in, the range allows a fourth quarter between about 535,000 and 574,000 barrels a day.
Unchanged. Like the oil figure, it includes Coterra, the producer Devon merged with, only from May 7. With nine months reported, the fourth-quarter range sits in the upper half of what this yearly range allows.
Unchanged. By our math, Devon spent about $3.6 billion in the first nine months. The fourth-quarter range would bring the year to about $4.95 billion, in the upper half. Finance chief Shane Young described that as right near the middle.
New. The plan has oil output 1–3% above this year on a like-for-like basis, without the Eagle Ford. By our math, it is about 2% above the 514,000 barrels a day the company estimates for 2026 without that field. Full 2027 figures arrive with fourth-quarter results in February.
New. Devon expects total output to grow 2–4% on the same like-for-like basis. By our math, that is about 3% above its 2026 estimate without the Eagle Ford.
New. The comparable figure for this year is $5.9 billion. The Eagle Ford sale takes out about $400 million, and savings and efficiency about $300 million. A $100 million water-system project adds some back. The figure excludes land and the Solitude gas pipeline stake, about $400 million next year, Young said.
❓ Key Questions
How much merger saving has Devon already booked?
Devon gave the yearly pace it expects by December, not the savings achieved so far. A dollar figure by cost line would show whether lower costs per barrel come from savings or simply from higher output.
Can buybacks pass $1 billion after a slow October?
Devon had used about $725 million of its programme by the end of October. That leaves roughly $900 million for November and December to meet the promise.
What do 2027 buybacks look like at $60 oil?
The 2027 cash plan uses oil near $80. Young said the drilling plan works at $60 to $70, but gave no figure for spare cash or buybacks at that price.
Why did the current tax rate exceed its range?
Devon paid current tax at 22% of pre-tax profit against a 15–17% range, and $472 million of tax in cash. An explanation would show whether the rate stays higher in 2027.
Will Devon hedge more of its 2027 gas?
Devon has hedged about 10% of next year’s gas. Until the Solitude pipeline runs, part of its Permian gas still sells at Waha prices, which turned negative in the spring.