Derivative Financial Instruments

6 Months Ended

Jun. 30, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Objectives and Strategies

Devon enters into derivative financial instruments with respect to a portion of its oil, gas and NGL production to hedge future prices received. Additionally, Devon periodically enters into derivative financial instruments with respect to a portion of its oil, gas and NGL marketing activities. These commodity derivative financial instruments include financial price swaps, basis swaps and costless price collars. Devon also periodically enters into interest rate swaps to manage its exposure to interest rate volatility. As of June 30, 2024, Devon did not have any open interest rate contracts.

Devon does not intend to hold or issue derivative financial instruments for speculative trading purposes and has elected not to designate any of its derivative instruments for hedge accounting treatment.

Counterparty Credit Risk

By using derivative financial instruments, Devon is exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. To mitigate this risk, the hedging instruments are placed with a number of counterparties whom Devon believes are acceptable credit risks. It is Devon’s policy to enter into derivative contracts only with investment-grade rated counterparties deemed by management to be competent and competitive market makers. Additionally, Devon’s derivative contracts generally contain provisions that provide for collateral payments if Devon’s or its counterparty’s credit rating falls below certain credit rating levels. As of June 30, 2024, Devon neither held cash collateral of its counterparties nor posted cash collateral to its counterparties.

Commodity Derivatives

As of June 30, 2024, Devon had the following open oil derivative positions. The first table presents Devon’s oil derivatives that settle against the average of the prompt month NYMEX WTI futures price. The second table presents Devon’s oil derivatives that settle against the respective indices noted within the table.


	Price Swaps				Price Collars
Period	Volume (Bbls/d)		Weighted Average Price ($/Bbl)		Volume (Bbls/d)		Weighted Average Floor Price ($/Bbl)		Weighted Average Ceiling Price ($/Bbl)
Q3-Q4 2024		28,000	$	78.97		83,000	$	67.80	$	85.04
Q1-Q4 2025		4,468	$	72.83		5,992	$	70.00	$	77.97


	Oil Basis Swaps
Period	Index	Volume (Bbls/d)		Weighted Average Differential to WTI ($/Bbl)
Q3-Q4 2024	Midland Sweet		69,500	$	1.17
Q3-Q4 2024	NYMEX Roll		26,000	$	0.82
Q1-Q4 2025	Midland Sweet		63,000	$	1.00
Q1-Q4 2026	Midland Sweet		18,000	$	1.21

As of June 30, 2024, Devon had the following open natural gas derivative positions. The first table presents Devon’s natural gas derivatives that settle against the Inside FERC first of the month Henry Hub index. The second table presents Devon’s natural gas derivatives that settle against the respective indices noted within the table.


	Price Swaps				Price Collars
Period	Volume (MMBtu/d)		Weighted Average Price ($/MMBtu)		Volume (MMBtu/d)		Weighted Average Floor Price ($/MMBtu)		Weighted Average Ceiling Price ($/MMBtu)
Q3-Q4 2024		279,000	$	3.18		15,000	$	3.00	$	3.65
Q1-Q4 2025		200,537	$	3.34		15,000	$	3.00	$	3.65
Q1-Q4 2026		80,000	$	3.90		—		—		—


	Natural Gas Basis Swaps
Period	Index	Volume (MMBtu/d)		Weighted Average Differential to Henry Hub ($/MMBtu)
Q3-Q4 2024	El Paso Natural Gas		10,000	$	(1.00	)
Q3-Q4 2024	Houston Ship Channel		160,000	$	(0.28	)
Q3-Q4 2024	WAHA		80,000	$	(0.74	)
Q1-Q4 2025	Houston Ship Channel		40,000	$	(0.35	)
Q1-Q4 2025	WAHA		10,000	$	(0.63	)
Q1-Q4 2026	Houston Ship Channel		25,000	$	(0.25	)

As of June 30, 2024, Devon had the following open NGL derivative positions. Devon's NGL positions settle against the average of the prompt month OPIS Mont Belvieu, Texas index.


		Price Swaps
Period	Product	Volume (Bbls/d)		Weighted Average Price ($/Bbl)
Q3-Q4 2024	Natural Gasoline		3,000	$	69.11
Q3-Q4 2024	Normal Butane		3,350	$	37.58
Q3-Q4 2024	Propane		5,250	$	33.01

Financial Statement Presentation

All derivative financial instruments are recognized at their current fair value as either assets or liabilities in the consolidated balance sheets. Amounts related to contracts allowed to be netted upon payment subject to a master netting arrangement with the same counterparty are reported on a net basis in the consolidated balance sheets. The table below presents a summary of these positions as of June 30, 2024 and December 31, 2023.


	June 30, 2024									December 31, 2023
	Gross Fair Value			Amounts Netted			Net Fair Value			Gross Fair Value			Amounts Netted			Net Fair Value			Balance Sheet Classification
Commodity derivatives:
Short-term derivative asset	$	44		$	(15	)	$	29		$	213		$	(5	)	$	208		Other current assets
Long-term derivative asset		5			(3	)		2			—			—			—		Other long-term assets
Short-term derivative liability		(39	)		15			(24	)		(7	)		5			(2	)	Other current liabilities
Long-term derivative liability		(10	)		3			(7	)		(7	)		—			(7	)	Other long-term liabilities
Total derivative asset	$	—		$	—		$	—		$	199		$	—		$	199