Devon Energy reported $2.01 billion in adjusted free cash flow for the third quarter of 2026, an increase of approximately 21% from the previous quarter, as the U.S. oil and gas producer prepares to accelerate share repurchases and concentrate investment in the Permian Basin.
The results mark Devon’s first full quarter of combined operations following its merger with Coterra Energy, completed on May 7, 2026.
The Houston-based company reported net earnings of $1 billion, or $0.88 per diluted share, while adjusted core earnings reached $1.63 billion, equivalent to $1.42 per share.
Operating cash flow totaled $2.8 billion, while adjusted operating cash flow reached $3.5 billion. Oil, natural gas, and natural gas liquids sales amounted to $5.9 billion.
Total production averaged 1.668 million barrels of oil equivalent per day (boe/d), including 553,000 barrels per day of oil. The Permian Basin accounted for 389,000 barrels per day of oil production, reinforcing its position as Devon’s principal growth engine.
Devon also reported cash operating costs of $12.89 per boe, approximately 2% below its guidance midpoint, while capital expenditures excluding acquisitions totaled $1.5 billion.
Devon repurchased $414 million of shares during the third quarter and distributed $366 million in dividends. The company also retired $750 million of debt, bringing total debt reduction since the Coterra merger to $1.25 billion.
Management expects share repurchases to exceed $1 billion in the fourth quarter, with additional acceleration planned for 2027.
That strategy will be supported by the previously announced $4.2 billion sale of Devon’s Eagle Ford assets, which is expected to close in early 2027.
The transaction, announced on October 8, is expected to generate approximately $3.5 billion in net proceeds after taxes and adjustments. Devon intends to direct part of those proceeds toward reducing gross debt to approximately $9 billion, with the remaining funds supporting additional buybacks.
Devon raised its projected annualized pre-tax merger synergy run rate for the end of 2026 to approximately $350 million, up 75% from its previous $200 million target.
The company now expects average synergies of approximately $700 million in 2027, compared with its earlier $600 million forecast, and continues to target at least $1 billion in annualized savings by the end of next year.
Cost reductions, operational improvements and more efficient capital allocation across the combined Devon-Coterra portfolio are contributing to the stronger outlook.
The integration also supports Devon’s strategy of developing longer horizontal wells and deploying technology to reduce drilling and completion costs.
Looking ahead, Devon expects to spend approximately $5.3 billion in 2027, with roughly 75% of its capital budget directed toward the Permian Basin, up from an estimated 63% in 2026.
The company forecasts oil production of approximately 525,000 barrels per day and total production of 1.6 million boe/d next year, adjusted for the planned Eagle Ford divestiture.
That outlook represents expected oil production growth of 1% to 3% compared with the company’s pro forma 2026 production base excluding Eagle Ford.
Devon reaffirmed its full-year 2026 guidance, which includes Coterra operations only from the May merger closing and retains Eagle Ford production through its expected divestiture. It expects fourth-quarter production of 1.66 million to 1.70 million boe/d.
Separately, Devon acquired a 25% interest in the Solitude Pipeline System during the third quarter, securing transportation capacity intended to connect Permian natural gas production with higher-value Gulf Coast and LNG-linked markets.
The combination of stronger cash generation, accelerating merger savings and portfolio restructuring positions Devon to prioritize shareholder distributions while concentrating future drilling investment in its core Permian assets.
By Charles Kennedy for Oilprice.com
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Source: finance.yahoo.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
