Devon Energy Gets A Boost From Advancing Production Volume

Buy-recommended Devon Energy (DVN) offers unlevered appreciation potential of 52% to estimated net present value [NPV] of $129 a share, revised up from $115 a share on May 29 when we raised long-term oil price to $66 a barrel from $60. Second quarter results reported on August 1 disclosed higher than expected unlevered cash flow (Ebitda) driven by advancing production volume.

Our lowest McDep Ratio large cap independent producer recommendation, Devon is concentrated 56% on natural gas by value. Oil concentration of 44% includes resource value in deep Gulf of Mexico discoveries featured in disclosures in September 2006. Currently above $8 a million btu and at $72 a barrel, long-term natural gas and oil price appear to be in uptrends despite volatility of short-term quotes. Finally, DVN stock also has positive momentum as it trades above its 200-day average.

Originally published on August 1, 2007.

DVN 1-yr chart: