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Is Devon Energy Executing Its Strategy Efficiently?
- The company has been able to grow its production impressively due to the acquisitions.
- Higher realized prices have resulted in impressive growth in revenues.
- An efficient hedging strategy has allowed the company to get better prices when the overall sector is under pressure due to the falling crude prices.
- Majority of the rise in the revenues have come from the increase production, which shows that the growth strategy has been paying off.
- Devon’s stock price recently jumped by approximately $7 per share. The increase was primarily attributed to the better than expected quarterly results.
- The company also completed its portfolio transformation. With the successful transformation, the company’s asset portfolio is now focused on rich resource plays in North America.
- The company has been successfully curtailing its costs. It reduced its total expenses as a percentage of revenues to only 66.7 percent from the previous year’s 73 percent.
- Devon had a great Q3 with revenues nearly doubling year over year and margins improving by 20%.
- Devon also increased Q4 production guidance by another 3%.
- With a forward P/E of 11, a P/B of 1.2 and a PEG ratio of 0.80, Devon remains undervalued relative to peers.
- The combination of midstream assets with Crosstex will allow the company to have stable income in the medium-long term.
- The demand for midstream infrastructure is growing rapidly, which should allow Enlink Midstream to do well.
- Falling crude prices have created some uncertainty in the short-term, but the long-term prospects of the sector are good.
- Devon Energy has dropped almost 30% as oil prices have slid towards $80 but the company's fundamentally strong profile remains.
- The company continues to increase higher margin oil production and that will support forecasted revenue and earnings growth.
- The stock currently trades near book value and sports a PEG ratio of just 0.68.
- If oil prices begin moving back towards $100, Devon could return to its recent highs of $80 - a 30% upside from here.
- A slowing global economy will put a downward pressure on demand for the oil sector.
- Weakened demand and strong supply will continue to lower oil prices in the short run.
- No unexpected increase is anticipated in dividends, as well as share repurchases.
- For short term investors, I’d recommend shorting the stock.
Devon Energy And Cimarex Energy Drive Cana's Strong Comeback
- The new completion formula is redefining drilling returns and expanding economic boundaries in the Cana-Woodford play.
- The article highlights value potential of this asset in Devon and Cimarex’s portfolios.
- The Meramec and Springer Shales may open an important new development dimension, adding multi-year drilling inventories.
The Bull Case For Devon Energy Is Getting Stronger
- The exploration & production sector has been a significant underperformer in the market during the 3rd quarter due to falling oil & natural gas prices.
- There are many attractive buying opportunities thanks to the recent decline in front of what is looking to be a cold winter. Devon Energy is one of those opportunities.
- The company is significantly boosting oil production, the stock is cheap given its growth prospects and the bull case for owning this mid-major is very strong right now.
Devon Energy Corporation: An Attractive Oil And Gas Investment
- Devon is one of the leading oil and gas companies with a strong presence in some of the most prolific US oil regions, including Permian Basin and Eagle Ford.
- Devon is well placed to capitalize on the growth in US oil production.
- It managed to generate 79% YOY growth from the US plays during the second quarter of 2014.
- Devon is a financially stable company that is positioning itself for growth by bringing focus to its business.
Devon Energy: Seasonal Trends Indicate Significant Upside From Here
- Exploration & Production companies are down sharply this summer on back of a $10 a barrel decline in oil prices.
- I have been allocating more funds to these beaten down E&P plays as it appears another harsh winter is on the way which will bolster the sector.
- One of these energy concerns is Devon Energy. The stock is well-positioned to deliver 15% to 25% upside by year end given historical trends and production growth.
- Reshuffling in the assets mix has allowed the company to decrease its net debt and enhance its balance sheet.
- Unusual activity in the options market indicates that the stock price of Devon might continue to fall in the short-term.
- Focus on the liquids will result in stable revenues as well as higher margins for the company.
- Devon's efficient well results in key areas point to further growth in production volumes as well as margin improvement.
Why Devon Is Still A Buy As Texas Propels This Company Farther
- Devon sold off assets to help pay for its $6 billion Eagle Ford purchase, and it looks like its splashy purchase could end up being a bargain.
- Through two top Texas shale plays, Devon can keep increasing its cash margins with a more oil weighted production mix.
- Increasing its Permian rig count to 20 from 12 will translate into significant production growth.
- Adding the Wolfcamp to its inventory could increase the number of possible drilling locations Devon has in the Permian by over 1,000.
- Exploring the upper and lower portions of the Eagle Ford could also yield more drilling locations.
- Devon Energy has rapidly boosted its oil output, which in turn raised its operating cash flow.
- Three SAGD projects will generate over $1 billion in FCF a year, all while realizing oil prices of just $60 - $70 a barrel.
- More takeaway capacity in the Canadian oil sands region could increase realized prices.
- Targeting the Cana-Woodford trend through a new completion technique has proved to be very effective.
- Devon's Anadarko Basin production mix could shift to over 50%.
- The company has experienced a handsome appreciation in share price over the past quarters.
- Devon Energy is currently going through a transition phase.
- Huge debt will lead to lower bottom lines in the coming quarters.
- Share price volatility has been a problem for Devon in the past as well.
- Devon has taken a number of steps in recent months to high-grade its portfolio and has significantly improved its investment profile.
- The company has been shifting focus away from gas to oil through a number of acquisitions and divestitures and has transformed itself into a much stronger and focused company.
- The transformation is largely complete now and the recent asset repositioning and capital re-allocation should lead to improving results.
- Exploration & Production industry is moving towards oil and liquid plays.
- Devon’s smart business strategy and efficient management sets it in a very strong position.
- Its significant portfolio transformation and move towards liquid plays is started to bear fruits.
- Devon is a good stock buy.
Devon Energy Shares Are Particularly Attractive Following Recent Correction
- Devon Energy shares have enjoyed a robust year so far but a recent pullback from $80 to $74 presents a buying opportunity for astute investors.
- Forecasted 2015 revenue and earnings growth from increased North American oil production as well as a divestiture of non-core assets should provide catalysts for a higher share price.
- With a forward P/E of just 11 and a PEG ratio of 0.72, expansion of valuation multiples could provide additional fuel for a rise in the share price.
Tue, Feb. 18, 5:30 PM
Fri, Jan. 24, 2:45 PM
- As the U.S. freezes and stocks plunge, benchmark U.S. natural gas futures topped $5/mmBtu for the first time since Aug. 2010 on expectations that continued cold weather would keep demand high for the heating fuel.
- Natl gas has moved well into overbought territory during the last few days as consumers have pumped up their thermostats, and the spike may last a while longer given that the cold snap is set to continue all of next week.
- Despite the run-up in prices for Jan. and Feb., longer-dated prices for the spring and summer remain below $4.50/mmBtu, providing little incentive for the likes of Chesapeake (CHK -0.1%), Devon (DVN -0.8%) and EOG (EOG -2%) to switch from oil to gas drilling.
- The shift to backwardation is a big boost to United States Natural Gas Fund (UNG +8.2%) and even bigger to the leveraged VelocityShares 3X Long Natural Gas ETN (UGAZ +24.4%).
- Other ETFs: GAZ, BOIL, DGAZ, UNL, KOLD, NAGS, DCNG.
Thu, Jan. 16, 6:35 PM
- Devon Energy (DVN) names Thomas Mitchell as its new CFO, joining the E&P company from rival Midstates Petroleum (MPO).
- Mitchell is a 30-year veteran of the oil and gas industry, having served with Noble Corp. and Apache as well as MPO.
- Mitchell succeeds Jeff Agosta, who is leaving DVN to pursue other interests; the company says his departure is not related to any issues regarding financial disclosures, accounting matters or other business issues.
Wed, Jan. 15, 7:22 PM
- Exploration and production companies tend to track crude oil prices, J.P. Morgan's Joseph Allman says, so look no further than the current state of the oil futures market for a reason to be bearish on the sector.
- WTI oil futures, which decline every quarter in 2014 and beyond, suggest an off year for the E&P group, Allman writes, noting that the set-up could be similar to 2012, when WTI was down 7% for the year and the S&P was up 13%.
- That doesn’t mean that some oil stocks can’t outperform: Allman likes EOG Resources (EOG) and Noble Energy (NBL) among large caps for their “resource expansion and improved operations.”
- His least favorite stocks in the sector include Anadarko Petroleum (APC), Devon Energy (DVN) and Chesapeake (CHK).
Dec. 23, 2013, 5:35 PM
Dec. 6, 2013, 9:08 AM
- Devon Energy (DVN) is throwing in the towel on its Canadian business and will put most of its Canadian natural gas production up for sale, Financial Post reports.
- When the assets are sold at a price estimated to fetch at least $3B, DVN hopes to emerge as a heavy oil company with interests in Alberta oil sands and cold-flow heavy oil, two growing areas.
- "When we look out a few years, we don't see any major catalyst to move the price of natural gas substantially," Devon Canada president Christopher Seasons says.
Dec. 4, 2013, 10:21 AM
Dec. 3, 2013, 8:58 AM
- Devon Energy (DVN) is upgraded to Buy from Hold with a $70 price target at Argus, citing DVN's planned acquisition of Eagle Ford acreage from GeoSouthern Energy which will accelerate the shift in the production mix toward higher-margin oil production and away from lower-margin natural gas.
- The firm also views the Crosstex merger as a positive development that will unlock shareholder value and provide DVN with capital that may be invested in upstream assets.
- Shares appear attractively valued at 14.1x the firm's 2013 EPS estimate and at 10.8x its 2014 EPS estimate, vs. a five-year historical average of 10.7x-13x.
- DVN +0.6% premarket.
Nov. 20, 2013, 5:30 PM
- Analysts say the $6B deal for GeoSouthern will give Devon Energy (DVN) a better balance between oil and natural gas.
- Canaccord says oil currently accounts for 12% of DVN's total volume, and the deal likely significantly increases DVN's oil production, as GeoSouthern is the fourth largest oil producer in the Eagle Ford.
- "The deal makes them more of an oil company and grows their production," says a Hodges Capital analyst. "A lot of people still have the idea that they are too much of a gas company and this deal will change that right away."
- The investor reaction to the deal was tempered by the high price paid, which Richard Zeits says sets a new record in the Eagle Ford play in terms of price paid per net undeveloped acre in a major transaction; the major beneficiary today was Penn Virginia (PVA), whose shares surged 4% thanks to its strong presence in the area.
Nov. 20, 2013, 9:16 AM
- Devon Energy (DVN) confirms it has reached a definitive agreement to acquire GeoSouthern Energy's Eagle Ford assets for $6B.
- The acquired assets include current production of 53K boe/day and 82K net acres with at least 1,200 undrilled locations.
- Estimated recoverable resource is 400M boe, mostly proved reserves, with the acreage position located in the best part of the play, as evidenced by the highest average initial production rates in the entire play and average estimated ultimate recoveries in DeWitt County exceeding 800K boe/well.
- DVN says the acquisition will be funded with a combination of cash on hand and borrowings.
- Shares +4.5% premarket after rising nearly 5% yesterday when WSJ first broke news of the deal.
Nov. 19, 2013, 2:33 PM
- Devon Energy (DVN +1.9%) reportedly is close to acquiring privately-held GeoSouthern Energy for ~$6B, and a deal could be announced as soon as tomorrow.
- GeoSouthern is a Texas-based oil and gas exploration company whose operations are focused in the Eagle Ford shale, which it helped pioneer.
Nov. 12, 2013, 10:48 AM
- Crosstex Energy LP (XTEX +4.2%) is upgraded to Outperform from Sector Perform with a $29 target price at RBC, which says the combination with Devon Midstream should result in a lower-risk investment-grade MLP, with attractive sponsor support offering increasing organic and dropdown growth options.
- Within this context, the firm thinks the 5.6% yield and above-average distribution growth outlook screens attractively vs. other investment-grade MLPs; execution on new projects is a key risk, but management has proven itself through a diverse project slate this year.
- Baird also upgrades XTEX to Outperform, adding that Crosstex Energy Inc. (XTXI) appears fully valued following the Devon announcement.
Nov. 9, 2013, 8:13 PM
- "We've diversified our efforts, cut expenses, and fully concentrated our efforts in North America, selling all but our most important holdings [abroad]," Devon Energy (DVN) CEO John Richels tells Barron's.
- Despite these efforts, and despite the company's generally well received move to merge its midstream assets with Crosstex Energy (XTXI) and Crosstex Energy LP (XTEX), Jack Willoughby thinks the market hasn't given the company enough credit.
- An interesting statistic cited by Willoughby: DVN "has risen to $60, but [is] down 15% from five years ago. Rival companies are up an average of 72% over that time."
- "The market values its 3B or so barrels of proven reserves at $8.50/barrel, the cheapest level of any independent producer and less than half of the $20-$25 figure in recent deals," Barron's continues, citing an analyst at Milwaukee-based Fiduciary Management. The same analyst values the stock at around $81.
- See also: Q3 numbers, Q3 summary, CC transcript
- For more on the Crosstex deal, see here and here
Nov. 7, 2013, 10:19 AM
- Crosstex Energy LP (XTEX -0.8%) and Crosstex Energy (XTXI -1%) say they have completed construction of Phase I of the Cajun-Sibon natural gas liquids expansion project, which connects their Eunice fractionator in southern Louisiana to Mt. Belvieu supply pipelines in east Texas.
- The pipeline is now delivering 25K-30K bbl/day into various Louisiana delivery points and is expected to be moving its full volume of ~70K bbl/day by the end of 2013.
- The partnership expects combined contribution of both phases of the Cajun-Sibon expansion project of $115M-$130M of annual run-rate adjusted EBITDA when completed, which is expected in H2 2014.
Nov. 6, 2013, 9:08 AM
- Devon Energy (DVN) +0.5% premarket after beating Q3 earnings estimates on higher output, which averaged 691K boe/day, up from 678K in the year-earlier period.
- Oil production rose 16% Y/Y to average 165K bbl/day; the most significant growth came from U.S. operations, where production jumped 38%, highlighted by growth from Permian Basin and Mississippian-Woodford Trend projects.
- Revenue from oil, natural gas and natural gas liquids sales totaled $2.3B in Q3, up 35% Y/Y, due to improved natural gas and oil price realizations combined with higher oil production; oil sales have climbed to nearly 60% of DVN's total upstream revenues.
- DVN is the second-worst performer in the past year in the S&P 500 Oil & Gas Exploration & Production Index, beating only Southwestern Energy (SWN).
Nov. 6, 2013, 8:03 AM
DVN vs. ETF Alternatives
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