Devon Energy targets 70% free cash flow return in 2026
Devon Energy released its 2026 outlook following the merger with Coterra Energy, targeting average production of 1.38 million barrels of oil equivalent per day and a capital plan of approximately $4.9 billion. The company plans to return up to 70% of free cash flow to shareholders through a $0.32 per share quarterly dividend and an $8 billion share repurchase authorization, while aiming to realize $1 billion in annual pre-tax synergies by the end of 2027.
*this image is generated using AI for illustrative purposes only.
Devon Energy provided an updated 2026 outlook for the combined company following its transformative merger with Coterra Energy, projecting average production of 1.380 million barrels of oil equivalent per day. The company plans to return up to 70% of free cash flow to shareholders through a quarterly fixed dividend of $0.32 per share and a previously announced $8 billion share repurchase authorization. Full-year capital spending is expected to total approximately $4.9 billion, with more than 60% allocated to the Permian Basin, reflecting a disciplined activity level of 31 rigs and 10 completion crews.
The capital investment plan anticipates 460 to 480 net wells coming online, optimized for free cash flow generation. Devon Energy expects to retire $1.25 billion of debt in 2026 while maintaining an investment-grade balance sheet with ample liquidity. The company is accelerating synergy capture, expecting to realize $600 million in synergies in 2027 and delivering $1.0 billion of annual pre-tax synergies on a run-rate basis by year-end 2027.
Production and Capital Guidance
The guidance reflects standalone Devon operations plus Coterra Energy beginning on May 7, 2026. Oil production is expected to average 500,000 barrels per day for the full year. The company provided detailed guidance for the second quarter and full year across production, capital expenditures, and other operational metrics.
| Metric | Q2 2026 Low | Q2 2026 High | FY 2026 Low | FY 2026 High |
|---|---|---|---|---|
| Production | ||||
| Oil (MBbls/d) | 485 | 505 | 490 | 510 |
| Natural gas liquids (MBbls/d) | 305 | 315 | 315 | 330 |
| Gas (MMcf/d) | 3,150 | 3,250 | 3,300 | 3,400 |
| Total oil equivalent (MBoe/d) | 1,315 | 1,360 | 1,355 | 1,405 |
| Capital Expenditures ($ millions) | ||||
| Upstream capital | $1,225 | $1,275 | $4,675 | $4,825 |
| Midstream and other capital | $25 | $75 | $125 | $175 |
| Total capital | $1,250 | $1,350 | $4,800 | $5,000 |
Operational and Financial Metrics
The company outlined expectations for price realizations, costs, and taxes. Oil price realizations are projected at 98% to 100% of WTI for the full year, while natural gas realizations are expected to range between 40% and 50% of Henry Hub. Leasing, operating, and equipment expenses (LOE) are forecast between $5.00 and $5.20 per barrel of oil equivalent (BOE).
| Metric | Q2 2026 Low | Q2 2026 High | FY 2026 Low | FY 2026 High |
|---|---|---|---|---|
| Price Realizations | ||||
| Oil - % of WTI | 98% | 102% | 98% | 100% |
| NGL - % of WTI | 21% | 25% | 24% | 26% |
| Natural gas - % of Henry Hub | 10% | 20% | 40% | 50% |
| Costs ($/BOE) | ||||
| LOE per BOE | $5.00 | $5.20 | $5.00 | $5.20 |
| GP&T per BOE | $3.20 | $3.40 | $3.00 | $3.20 |
| Depreciation, depletion and amortization per BOE | $11.50 | $12.00 | $11.00 | $11.50 |
| General and administrative expenses per BOE | $1.30 | $1.40 | $1.35 | $1.45 |
| Taxes | ||||
| Current income tax rate | 19% | 21% | 13% | 15% |
| Effective income tax rate | 23% | 25% | 22% | 24% |
Strategic Focus
Clay Gaspar, president and CEO, emphasized the strength of the newly combined platform, stating the company is carrying a sense of urgency into integration, execution, and portfolio review. A strategic review is underway to concentrate the portfolio around the premier Permian position to improve shareholder returns. The company noted that shared best practices and technology are driving progress on capital optimization, operating margin improvements, and corporate cost structure.
What specific assets are likely to be divested as part of the strategic review to concentrate the portfolio on the Permian Basin?
How will the company balance the accelerated $1 billion synergy target with operational stability during the integration period?
What are the long-term production growth expectations beyond 2026 once the integration and synergy capture phases are complete?
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