How DVN (Devon Energy) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a leading independent energy company like DVN makes money is essential for investors and anyone interested in the business of oil and gas exploration and production. In this post, we break down DVN's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick DVN Overview

DVN operates as an independent energy company focused on the exploration, development, and production of oil, natural gas liquids (NGLs), and natural gas, primarily in high-quality acreage in the U.S. Revenue comes primarily from the sale of oil, NGLs, and natural gas across its operating basins. The company emphasizes efficient operations in key regions like the Permian Basin, with segments centered around hydrocarbon production and marketing.

Revenue Breakdown

• Total Revenue (Q3 2025): $4.25B (+13.8% YoY)
  • Total Oil Revenue: $3.20B (75.3% of total)
  • Total NGL Revenue: $0.61B (14.4% of total)
  • Total Gas Revenue: $0.44B (10.3% of total)
  • Growth is powered by higher oil and NGL volumes, with exceptional gas revenue expansion from a low base.

Gross Profit and Margins

• Gross Profit: $1.02B (23.9% gross margin)
  • Cost of Revenue: $3.24B (+19.5% YoY)
  • DVN maintains robust margins due to its low-cost production profile in premium basins and favorable commodity pricing dynamics.
• Most costs come from production expenses, royalties, and gathering/transportation tied directly to hydrocarbon output.

Operating Income and Expenses

• Operating Income: $0.90B (-0.8% YoY, 21.2% margin)
• Operating Expenses: $1.67B (+X% YoY, approximated from components)
  • R&D: Not applicable (minimal in E&P sector)
  • SG&A: $1.56B (+24.6% YoY, 36.6% of revenue) — Covers general corporate overhead, exploration costs, and administrative functions amid expansion efforts.
  • DVN continues to prioritize innovation in drilling efficiency and cost control while expanding operations in core acreage.

Net Income

• Pre-Tax Income: $0.91B (-14.3% YoY, 21.5% margin)
• Income Tax: $0.22B (24.0% effective tax rate)
• Net Income: $0.69B (-15.4% YoY, 16.2% net margin)
• DVN converts a significant portion of sales into profit due to operational efficiency, pricing power in oil markets, and a lean cost structure.

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What Drives DVN's Money Machine?

• Oil Revenue: 75.3%+ of revenue, driven by high-volume production from Permian and other basins (+3.6% YoY).
• Production Volumes and Realized Prices: Key metric with oil dominating cash flows; gas surged 184.4% YoY on volume gains.
• Exploration and Development: Strategic investments in acreage acquisition and technology for enhanced recovery.
• Future growth areas: LNG export exposure and NGL optimization, though gas remains lower-margin.

Visualizing DVN's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 16.2% of revenue drops to the bottom line.

Key Takeaways

• DVN's money comes overwhelmingly from oil sales
• High gross and net margins illustrate the power of DVN's low-cost E&P model
• Heavy investment in exploration, balanced by efficiency in production costs
• Ongoing growth is driven by volume increases and commodity strength

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FAQ About DVN's Income Statement

1. What is the main source of DVN's revenue in 2025?

DVN generates over 75% of its revenue from Total Oil Revenue. NGLs and gas contribute 14.4% and 10.3%, respectively.

2. How profitable is DVN in Q3 2025?

DVN reported net income of $0.69B in Q3 2025, with a net margin of approximately 16.2%, reflecting strong profitability driven by high oil contributions and cost discipline despite higher expenses.

3. What are the largest expense categories for DVN?

The biggest expenses on DVN's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs and cost of revenue. SG&A investment reached $1.56B in Q3 2025, as DVN prioritizes exploration and development.

4. Why does gas revenue operate at a relatively low share?

Gas, despite generating $0.44B in revenue, represents only 10.3% of total due to lower pricing versus oil. This is because DVN aggressively invests in oil-focused basins, believing these will drive long-term growth—even if gas is a smaller contributor today.

5. How does DVN's effective tax rate compare to previous years?

DVN's effective tax rate in Q3 2025 was 24.0%, consistent with previous years. This moderate rate is primarily due to standard U.S. corporate taxation on E&P income with limited international offsets.