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The Committee refined its performance bonus determination process so that (1) executives are assigned a target bonus opportunity and (2) actual payouts as compared to target opportunities are determined by reference to pre-set Company performance measures. In addition, the Compensation Discussion and Analysis now discloses the formula used in making bonus determinations.

The bonus determination process resulted in a decrease in the direct pay awarded to each of the Company’s named executive officers in 2011 compared with 2010 awards.

In 2011 the Committee transitioned away from making restricted stock awards that vest without regard to Company performance. The Committee instead adopted two new forms of long-term incentives: Performance Share Units (PSU) that vest based on a comparison of the Company’s total stockholder return (TSR) to a peer group and Performance Restricted Stock (PRS) that only vests if a financial metric is achieved. Granted in conjunction with stock options that only benefit executives if our stock price increases, the addition of PSUs and PRS make the Devon long-term incentive package 100% performance based.

The changes to long-term incentives mean any future gains executives may achieve from these awards will be directly tied to Company financial and stock price performance.

Additionally, the Committee lowered the direct pay of the Executive Chairman by 58% in recognition of the transition of his former responsibilities as CEO to John Richels.

The Committee recalibrated its benchmarking peer group by replacing Chevron Corporation with Newfield Exploration Company in order to more closely align the group with the size and mix of Devon’s business and operations.

In 2012 the Committee will use the recalibrated peer group for all aspects of its pay determinations (i.e., executive pay benchmarking, bonus determinations that rely on the Company’s ranking in relation to peer group TSR performance, and PSU payout levels).

As discussed on page 34 of the 2012 Proxy Statement, Devon produced strong operating results in 2011 relative to most performance goals and to peers in the E&P industry. Moreover, the Company achieved these results during a time of significant transition as the Company completed the divestiture of its offshore assets in the Gulf of Mexico and countries outside North America in order to re-focus efforts on expanding operations in North America.

The standardized peer group methodology utilized by ISS Proxy Advisory Services (ISS) to make relative pay and performance comparisons results in the inclusion of companies with which Devon does not compete for investors, customers, personnel talent or production resources. Seven of the 12 companies in the ISS-generated peer group are not in the E&P industry—three are coal companies, three are pipeline companies, and one is a refiner. This defect overstates Devon’s executive pay relative to peers and incorrectly implies pay is not aligned with performance.

The chart below reflects the composition of the two peer groups as well as the differences in the percentile ranks of TSR and CEO pay yielded from the two groups (0 to 100 = lowest to highest). A comparison of the two yields the following conclusions:

Within the E&P industry, the Company’s CEO pay ranks at approximately the median.

The Company’s CEO pay is fairly well aligned to performance when compared to the Company’s E&P peer group rather than a group mechanically and somewhat arbitrarily assigned by ISS.

We see Devon’s one-year and three-year TSR through the end of 2011 as disappointing, but we believe the Company’s strong 2011 operational results and the market’s positive reception to date in 2012 validate the Company’s strategic decision to focus on high value oil, natural gas liquids and natural gas exploration and production activities in North America.

The Committee’s 2011 Peer Group

ISS Peer Group

Devon 1 YR TSR Return:

33^rd Percentile

Devon 1-YR CEO Pay:

45^th percentile

Devon 1-YR TSR:

30^th percentile

Devon 1-YR CEO Pay:

73^rd percentile

Devon 3 YR TSR:

5^th percentile

Devon 3-Yr CEO Pay:

52^nd Percentile

Devon 3-Yr TSR:

0 Percentile

Devon 3-YR CEO Pay:

72^nd percentile

Companies:

Companies:

Anadarko Petroleum Corp.

Apache Corp.

Alpha Natural Resources, Inc. (Coal)

Anadarko Petroleum Corp. (E&P)

Chesapeake Energy Corp.

Chevron Corp.

Apache Corp.

(E&P)

Chesapeake Energy Corp.

(E&P)

ConocoPhillips

EnCana Corp.

CONSOL Energy, Inc.

(Coal)

Energy Transfer Partners LP (Pipeline/Midstream)

EOG Resources, Inc.

Hess Corp.

EOG Resources, Inc.

(E&P)

HollyFrontier Corp.

(Refiner/Marketer)

Marathon Oil Corp.

Murphy Oil Corp.

Occidental Petroleum Corp. (E&P)

Peabody Energy Corp.

(Coal)

Noble Energy, Inc.

Occidental Petroleum Corp.

Spectra Energy Corp.

(Pipeline/Midstream)

The Williams Companies, Inc. (Pipeline/Midstream)

Pioneer Natural

Resources Corp.

Talisman Energy, Inc.