Devon Energy NYSE: DVN plans to accelerate share repurchases and concentrate spending in the Permian Basin after completing a post-merger portfolio review, executives said on the company’s third-quarter earnings call.
The oil and gas producer outlined a preliminary 2027 capital program of approximately $5.3 billion, with about 75% directed to the Permian. The outlook assumes its Eagle Ford sale closes in early 2027. Devon expects oil production of approximately 525,000 barrels per day and total production of about 1.6 million barrels of oil equivalent per day next year.
President and CEO Clay Gaspar said the review established the Permian as Devon’s cornerstone, while the Anadarko, Marcellus and Rockies assets will play complementary roles. The company will continue to consider portfolio changes even though the broad review has concluded, he said.
“While this is the end of this chapter, this in no way means you shall never see another opportunity for us to proactively move in the shareholders’ best interest,” Gaspar said.
Third-quarter cash flow and returns
Devon generated $3.5 billion in discretionary cash flow during the third quarter, more than 20% above the prior period, Executive Vice President and Chief Financial Officer Shane Young said. Capital spending was $1.5 billion, resulting in $2 billion of free cash flow.
Oil and total production were within guidance and reached record highs, Young said, without specifying the volumes on the call. Natural gas realizations rebounded to almost $2 per thousand cubic feet, including an average of $1.74 in the Permian, he said.
Devon repurchased nearly 9 million shares for $414 million in the quarter and paid a dividend of $0.32 per share, or $366 million. It also retired the remaining $750 million of a term loan, bringing debt reduction since the Coterra merger closed to $1.25 billion.
The company expects fourth-quarter repurchases to exceed $1 billion. Young said Devon intends to use up to 70% of annual free cash flow for dividends, repurchases and debt repayments, and plans to favor buybacks with net proceeds from the Eagle Ford sale.
For the fourth quarter, Devon forecast oil production of 550,000 to 560,000 barrels per day, total production of 1.66 million to 1.7 million barrels of oil equivalent per day, and capital spending of $1.29 billion to $1.395 billion. Those figures include Eagle Ford activity for the rest of the year.
2027 spending and cash outlook
Young said the $5.3 billion preliminary capital program compares with a pro forma 2026 baseline of $5.9 billion. The Eagle Ford sale accounts for a little more than $400 million of the reduction, while synergies and efficiencies, net of modest inflation, remove another $300 million. A smaller increase in Permian water infrastructure spending partially offsets those savings.
The 2027 capital figure excludes potential land acquisitions and Devon’s investment in the Solitude Pipeline System. Young said the company expects to invest approximately $400 million in the pipeline next year and $500 million over the project’s life, including nearly $100 million invested year to date.
Based on current costs and commodity prices, Devon projects approximately $12 billion of cash flow in 2027. Combined with $3.5 billion of expected net Eagle Ford proceeds, it could have $15.5 billion in cash inflows. After capital spending, dividends, debt maturities, pipeline investment and acreage spending, Young said the company could have $6 billion of excess free cash flow to support buybacks and liquidity.
Devon also plans to retire another $1.5 billion of long-term debt in 2027, reaching its gross debt target of roughly $9 billion, Young said.
Portfolio and operational priorities
Gaspar said Devon chose to sell Eagle Ford because the market valued the asset materially above the company’s internal assessment. He said the sale would increase inventory life, lower breakevens and reduce the company’s base decline. The remaining complementary assets provide investment opportunities and free cash flow, he said.
Gaspar said Devon expects low-single-digit oil growth over the next few years and 5% to 10% annual growth in free cash flow per share. Development of recently acquired federal acreage is expected to begin around mid-2027, with meaningful production in early 2028.
Executive Vice President of Operations Blake Sirgo said Devon expects average lateral lengths to rise more than 10% in 2027, supported by 53 four-mile wells across four basins. He said the company expects an all-in drilling, completions, facilities and flowback cost of around $750 per foot next year.
Asked about Devon’s share performance since the merger, Gaspar said he was dissatisfied and that investors had sought clarity on the company’s strategy. Management views the stock as an attractive use of cash, Young said, adding that Devon expects to continue leaning into repurchases in 2027.
About Devon Energy (NYSE:DVN)
Devon Energy Corporation is an independent energy company focused on exploring for and producing oil, natural gas and natural gas liquids. Its activities include developing and operating producing properties and managing the infrastructure needed to bring its products to market.
Founded in 1971, Devon is headquartered in Oklahoma City. Its operations are concentrated in U.S. onshore basins, including the Delaware Basin, Eagle Ford, Anadarko, Williston and Powder River basins.
The company’s portfolio has evolved through acquisitions and asset sales over its history.
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