Model Updates for Federal Lease Sale Activity

Research evidence excerpt

Model Updates for Federal Lease Sale Activity

RBC Capital Markets, LLC

Scott Hanold (Analyst)

(512) 708-6354,

scott.hanold@rbccm.com

Samuel Cox (Senior

Associate)

(512) 708-6309,

samuel.cox@rbccm.com

May 22, 2026 Octavian Jordan (AVP)

(212) 618-3012,

octavian.jordan@rbccm.com Model Updates for Federal Lease Sale ActivityRESEARCH DVN, MTDR and PR Enhance Core N.M. Permian Positions

Our view: This week's $4 billion Federal lease sale included significant buying by DVN ($2.6 billion) and

MTDR ($1.1 billion) along with PR ($152 million). We have updated our models to include the impact of

the cost to the companies' financial statements. The permitting and planning process could take several

quarters, so we don't anticipate initial drilling to occur until mid-2027 with production likely more a 2028

impact. For MTDR and DVN in particular, given the size of the acreage acquired, capital productivity could

improve in 2028 if these assets are developed meaningfully at that time. From a leverage perspective,

the companies have adequate capacity to fund with cash/revolver capacity.EQUITY

Model Updates. We publish updated models for DVN, MTDR, and PR reflecting additional land capital

expenditures of $2.6 billion, $1.1 billion and $152 million, respectively. Funding for the lease sale should

occur in the next week, so part of 2Q26 financials.

Devon Energy (DVN): Spent $2.6 billion on 16,297 acres adding ~400 net locations. This infers $162,000/

acre and assuming 10,000-foot laterals amounts to 32 wells/section and $6.5 million per well. This

amounts to approximately one year of Permian drilling based on a normalized proforma (DVN/CTRA)

pace. DVN has ~$3 billion of cash for funding. We continue to see the Anadarko Basin ($4+ billion) and