Devon Energy reported net earnings of $1.9 billion, or $2.03 per diluted share, for the second quarter of 2026, its first reporting period to include operations acquired through its merger with Coterra Energy.
Core earnings, which exclude items the company says analysts typically remove from estimates, totaled $1.5 billion, or $1.57 per diluted share. The results include combined operations from May 7, when Devon completed the Coterra transaction.
Operating cash flow reached $3.7 billion, while adjusted operating cash flow was $2.9 billion. Devon generated $1.7 billion of adjusted free cash flow, excluding $174 million of after-tax restructuring costs associated with the merger.
Production averaged 1.359 million barrels of oil equivalent per day, near the top of Devon’s guidance range of 1.315 million to 1.36 million boepd. Oil output averaged 503,000 barrels per day, also near the upper end of its 485,000-to-505,000-bpd forecast.
The company attributed the production result partly to stronger-than-expected well performance in the Delaware Basin.
Capital spending totaled $1.269 billion, below the midpoint of Devon’s quarterly forecast. The company said the difference primarily reflected project timing and cost management.
Oil, natural gas and natural gas liquids sales totaled $5.1 billion. Including hedges, Devon realized an average of $88.09 per barrel for oil, $22.70 per barrel for NGLs and $1.05 per thousand cubic feet for natural gas. The company said its gas realizations were affected by weak Waha pricing and pipeline constraints in the Permian Basin.
Devon returned approximately $1.06 billion through dividends, share repurchases and debt reduction during the quarter. That included $366 million in dividends, $197 million spent repurchasing 4.3 million shares and $500 million of debt repayments.
The quarterly dividend was increased by 33% to $0.32 per share following the Coterra transaction. Devon has $7.8 billion remaining under its share-repurchase authorization.
The producer also spent $2.6 billion in cash to acquire 16,300 net acres at a federal lease sale in New Mexico. Devon estimates the acreage adds around 400 drilling locations in the Delaware Basin and expects development to begin in 2027.
Devon said it has identified more than 350 integration initiatives and continues to target at least $1 billion in annual pre-tax cost and operational benefits by the end of 2027. Around $600 million of those anticipated savings are expected to be captured during 2027.
Management is also reviewing the combined company’s assets based on capital efficiency, free cash flow contribution and strategic fit, potentially setting the stage for portfolio changes as the Coterra integration progresses.
For the third quarter, Devon expects total production of between 1.66 million and 1.69 million boepd, including oil production of 550,000 to 560,000 bpd. Capital spending is forecast at between $1.4 billion and $1.5 billion.
Full-year guidance remains unchanged, with production expected to average between 1.364 million and 1.398 million boepd and capital spending forecast at $4.8 billion to $5 billion. The annual outlook includes Coterra’s operations only from the May 7 closing date.
By Charles Kennedy for Oilprice.com
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