DEVON ENERGY CORP/DE Income Taxes Disclosure
Income Tax Expense
The following table presents Devon’s income tax expense.
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Earnings (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|||
U.S. |
|
$ |
3,474 |
|
|
$ |
3,721 |
|
|
$ |
4,609 |
|
Canada |
|
|
(8 |
) |
|
|
(9 |
) |
|
|
14 |
|
Total earnings before income taxes |
|
$ |
3,466 |
|
|
$ |
3,712 |
|
|
$ |
4,623 |
|
Current income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
$ |
285 |
|
|
$ |
427 |
|
|
$ |
441 |
|
Various states |
|
|
16 |
|
|
|
32 |
|
|
|
27 |
|
Canada |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
Total current income tax expense |
|
|
301 |
|
|
|
459 |
|
|
|
465 |
|
Deferred income tax expense: |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
|
406 |
|
|
|
267 |
|
|
|
365 |
|
Various states |
|
|
78 |
|
|
|
44 |
|
|
|
11 |
|
Total deferred income tax expense |
|
|
484 |
|
|
|
311 |
|
|
|
376 |
|
Total income tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|||
U.S. federal |
|
|
691 |
|
|
|
694 |
|
|
|
806 |
|
Various states |
|
|
94 |
|
|
|
76 |
|
|
|
38 |
|
Canada |
|
|
— |
|
|
|
— |
|
|
|
(3 |
) |
Total income tax expense |
|
$ |
785 |
|
|
$ |
770 |
|
|
$ |
841 |
|
Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate to earnings before income taxes as a result of the following:
|
|
Year Ended December 31, |
|
||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||||||||
U.S. federal statutory tax rate |
|
$ |
728 |
|
|
21 |
% |
|
$ |
780 |
|
|
21 |
% |
|
$ |
971 |
|
|
21 |
% |
U.S. federal: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Tax credits |
|
|
(32 |
) |
|
(1 |
%) |
|
|
(85 |
) |
|
(2 |
%) |
|
|
(133 |
) |
|
(3 |
%) |
Nontaxable and nondeductible items |
|
|
2 |
|
|
— |
|
|
|
(13 |
) |
|
— |
|
|
|
(15 |
) |
|
— |
|
Effect of changes in tax laws or rates |
|
|
8 |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
Other |
|
|
(3 |
) |
|
— |
|
|
|
4 |
|
|
— |
|
|
|
(17 |
) |
|
(1 |
%) |
U.S. state income taxes (1) |
|
|
74 |
|
|
3 |
% |
|
|
60 |
|
|
2 |
% |
|
|
30 |
|
|
1 |
% |
Foreign tax effects |
|
|
2 |
|
|
— |
|
|
|
2 |
|
|
— |
|
|
|
(6 |
) |
|
— |
|
Changes in unrecognized tax benefits |
|
|
6 |
|
|
— |
|
|
|
22 |
|
|
— |
|
|
|
11 |
|
|
— |
|
Effective income tax rate |
|
$ |
785 |
|
|
23 |
% |
|
$ |
770 |
|
|
21 |
% |
|
$ |
841 |
|
|
18 |
% |
On July 4, 2025, OBBB was signed into law. In addition to other provisions, OBBB includes permanent reinstatement of 100% bonus depreciation and the expensing of domestic research costs beginning in 2025 and allows for the deduction of intangible drilling costs as part of the computation of the CAMT beginning in 2026. Accordingly, Devon’s 2025 income tax expense included a current tax benefit of approximately $215 million and a corresponding deferred tax expense associated with the deferral of income taxes resulting from the enactment of OBBB.
Income Taxes Paid
The following table presents the components of Devon's income taxes paid or refunded.
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. federal |
|
$ |
149 |
|
|
$ |
439 |
|
|
$ |
350 |
|
Various states: |
|
|
|
|
|
|
|
|
|
|||
New Mexico |
|
|
5 |
|
|
|
20 |
|
|
|
28 |
|
Texas |
|
|
22 |
|
|
|
11 |
|
|
|
23 |
|
North Dakota |
|
|
10 |
|
|
|
12 |
|
|
|
1 |
|
Other |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Subtotal |
|
|
37 |
|
|
|
43 |
|
|
|
53 |
|
Canada |
|
|
— |
|
|
|
(2 |
) |
|
|
(3 |
) |
Total |
|
$ |
186 |
|
|
$ |
480 |
|
|
$ |
400 |
|
Deferred Tax Assets and Liabilities
The following table presents the tax effects of temporary differences that gave rise to Devon’s deferred tax assets and liabilities.
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Capital loss carryforwards |
|
$ |
522 |
|
|
$ |
497 |
|
Net operating loss carryforwards |
|
|
375 |
|
|
|
428 |
|
Accrued liabilities |
|
|
219 |
|
|
|
191 |
|
Asset retirement obligations |
|
|
206 |
|
|
|
181 |
|
CAMT credit |
|
|
179 |
|
|
|
— |
|
Other |
|
|
18 |
|
|
|
28 |
|
Total deferred tax assets before valuation allowance |
|
|
1,519 |
|
|
|
1,325 |
|
Less: valuation allowance |
|
|
(829 |
) |
|
|
(794 |
) |
Net deferred tax assets |
|
|
690 |
|
|
|
531 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property and equipment |
|
|
(3,251 |
) |
|
|
(2,669 |
) |
Other |
|
|
(66 |
) |
|
|
(10 |
) |
Total deferred tax liabilities |
|
|
(3,317 |
) |
|
|
(2,679 |
) |
Net deferred tax liability |
|
$ |
(2,627 |
) |
|
$ |
(2,148 |
) |
At December 31, 2025, Devon has recognized $375 million of deferred tax assets related to various net operating loss carryforwards available to offset future taxable income. Devon has $38 million of U.S. federal net operating loss carryforwards which do not expire. Devon has $14 million of Canadian net operating loss carryforwards, all of which are covered by a valuation allowance. Devon also has $323 million of state net operating loss carryforwards, with $145 million expiring between 2027 and 2040, $178 million with no expiration, and $288 million of which are covered by a valuation allowance.
Devon’s $38 million U.S. federal net operating losses were acquired through the merger with WPX. These net operating losses are subject to limitation pursuant to Section 382 of the Internal Revenue Code of 1986, which relates to limitations upon the 50% or greater change of ownership of an entity during any three-year period. The Company anticipates utilizing these net operating losses prior to their expiration.
Devon's remaining Canadian deferred tax assets of $527 million, primarily made up of $515 million of capital losses, are fully covered by a valuation allowance.
Unrecognized Tax Benefits
The following table presents changes in Devon’s unrecognized tax benefits.
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
|
|
(Millions) |
|
|||||
Balance at beginning of year |
|
$ |
105 |
|
|
$ |
83 |
|
Tax positions taken in prior periods |
|
|
10 |
|
|
|
22 |
|
Settlements |
|
|
(4 |
) |
|
|
— |
|
Balance at end of year |
|
$ |
111 |
|
|
$ |
105 |
|
Devon's unrecognized tax benefit balance at December 31, 2025 and 2024 included $18 million and $12 million, respectively, of interest. At December 31, 2025 and 2024, there were $111 million and $105 million, respectively, of current unrecognized tax benefits that if recognized would affect the annual effective tax rate.
Included below is a summary of the tax years, by jurisdiction, that remain subject to examination by taxing authorities.
Jurisdiction |
|
Tax Years Open |
U.S. federal |
|
2018-2025 |
Various U.S. states |
|
2021-2025 |
Canada |
|
2006-2025 |
Certain statute of limitation expirations are scheduled to occur in the next twelve months. Devon is currently in various stages of the audit and administrative review process for certain open tax years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2017 | Feb 21, 2018 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.