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Devon Energy Corporation (DVN): New Analyst Report from Zacks Equity Research - Zacks Equity Research Reportat Zacks.com (Nov 24, 2014)
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.
Wed, Dec. 3, 11:32 AM
- The energy sector (XLE +1.5%) continues its momentum from yesterday, leading the way again as the best performing sector in early trading with crude oil rising 1.2% so far today and reports that U.S. well permits fell 40% last month.
- Top performers include Clayton Williams (CWEI +7.7%), Transocean Partners (RIGP +10.6%), Gaslog (GLOG +13.8%) and Energy XXI (EXXI +15.7%).
- Other leading energy names are showing stronger recoveries as they clear last Friday's bearish gap zone: XOM +0.2%, CVX +0.4%, COP +2.5%, OXY +2.5%, DVN +2.9%, EOG +2.5%, HES +2.2%, MUR +1.5%, NBL +2.3%, PXD +4.2%, SU +3%, CNQ +1.9%.
- Some analysts warn that the worst may not be over, however, as much of the advance is being driven by investors repurchasing ETFs they used to make short bets; investors also could opt to sell oil shares at a loss in coming weeks to reduce tax burdens.
Tue, Dec. 2, 2:48 PM
- Energy stocks (XLE +1.4%) are posting the day's largest gains among S&P sectors, rebounding from recent losses even as Nymex crude oil fell another $2.05 to $66.97/bbl.
- Refiners Marathon Petroleum (MPC +4%) and Valero (VLO +4.1%) and pipeline operator Williams Cos. (WMB +1.5%) are among the top gainers, while losers include most oil services companies such as Halliburton (HAL -2.2%) and rig operator Transocean (RIG -3.7%).
- Anadarko Petroleum (APC +1.6%), Cimarex Energy (XEC +1%), Devon Energy (DVN +0.7%), EOG Resources (EOG +3.8%) and Marathon Oil (MRO +3.5%) were selected top “safe haven” picks for analysts at Tudor Pickering Holt, which said they are “liquid names with high-quality assets and healthy balance sheets."
Wed, Nov. 5, 2:37 PM
- After taking a beating in the previous two sessions in the wake of plunging oil prices, energy stocks are attracting buyers today and accounting for nearly a third of the session's total gains on the S&P 500.
- The advance has been underpinned by strong showings by Devon Energy (DVN +9.3%) and EOG Resources (EOG +5.9%), which posted better than expected earnings results and higher production growth guidance.
- DVN's Q3 revenues nearly doubled Y/Y to $5.35B from $2.71B, cash margins rose 20% as costs per barrel fell 3% Q/Q, and it raised the midpoint of Q4 production guidance by 3% to 617 boe/day without any increase in capital spending.
- At EOG, Q3 production jumped 29% and is further boosting its growth target for oil even in the face of a market slump, and says results from wells drilled in the Permian Basin confirm that almost two thirds of its 140K-acre land position there is promising and will provide a high rate of return.
Thu, Oct. 9, 3:25 PM
- Crushed by relentless anxiety about oversupply and weakening global demand, Nymex crude oil futures closed down $1.54 at $85.76/bbl, their lowest close since Dec. 2012, while Brent crude fell below $90/bbl for the first time in more than two years.
- Including today's losses, WTI crude is down 6.2% since the start of the month and Brent has surrendered ~5%.
- In the face of surging output, a move in WTI below its 10-year average at $82 is not out of the realm of possibility, Brown Brothers Harriman says, adding that "a break of $73/barrel could send WTI toward $64, which corresponds with the 2010 low."
- Among big oil names so far today: APC -6.3%, LINE -4.6%, EPD -3.8%, DVN -3.8%, MRO -3.6%, HES -3.8%, KMI -3.7%, TOT -3.5%, STO -3.3%, RDS.A -3.1%, OXY -3%, KMP -3%, XOM -2.6%, COP -2.6%, MUR -2.6%, CVX -2.5%, BP -2.4%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, DTO, DBO, DUG, IYE, XES, IEO, CRUD, IEZ, PXE, USL, UWTI, PXJ, FENY, DNO, DWTI, RYE, FXN, SZO, OLO, DDG, OLEM, TWTI
Mon, Jun. 30, 12:17 PM
- Devon Energy (DVN +0.2%) received a better than expected price in its $2.3B deal to sell non-essential U.S. assets to Linn Energy (LINE +1.6%), Wells Fargo analyst David Tameron says.
- DVN brought in well above the high end of expectations, which the firm presumes was $1.2B-$1.4B; the divestment helps further delever DVN’s balance sheet, and management expects to reduce net debt by ~$4B by year-end.
- LNCO +2.6%.
Tue, May. 20, 11:22 AM
- Devon Energy (DVN +2.2%) moves within a dollar of its 52-week high after Barclays upgrades shares to Overweight from Equal Weight to reflect the impact of its oil growth strategy on valuation and stock performance.
- Barclays says DVN's balance sheet adjusted growth rate correlation with share prices as “very good proxies for returns on new capital."
- Also, Oppenheimer raises its DVN price target to $85 from $75; following a recent meeting with COO David Hager, the firm is upbeat on DVN's recent transactions and expects it to generate $600M of free cash flow next year, enabling it to reduce its debt (Briefing.com).
Wed, May. 7, 8:58 AM
- Devon Energy (DVN) +1.6% premarket after reporting a Q1 profit compared with a year-ago loss when it wrote down the value of some natural gas assets.
- Q1 oil and gas output totaled 691K boe/day, up 0.6% Y/Y; excluding production associated with divestiture properties, top-line production from Devon's retained, go-forward asset base rose 7% Y/Y to 563K boe/day.
- Led by the Permian Basin and Eagle Ford, DVN's most significant growth came from retained U.S. operations, where oil production jumped 56% Y/Y.
- Average realized prices, before hedging impacts, jumped 29% for oil and 51% for natural gas.
Fri, Mar. 7, 2:57 PM| 3 Comments
Wed, Mar. 5, 10:56 AM
- Crosstex Energy LP (XTEX -1.7%) is downgraded to Hold from Buy with a $33 target price at Wunderlich, as it believes near-term yield compression from synergies and growth development may be limited.
- For investors with higher risk tolerance, the firm prefers to play the story through general partner Crosstex Energy Inc. (XTXI -1.2%), which offers sector-leading dividend growth estimated at 53% in 2014 and 43% in 2015.
- The legacy businesses remain challenged, which could be a risk to 2014 guidance and 2015-16 double-digit distribution growth, the firm adds.
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.
Dec. 23, 2013, 5:35 PM
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.
Oct. 22, 2013, 10:18 AM
- Halliburton (HAL +2.1%) bounces back following modestly disappointing Q3 results, and Jefferies reiterates its Buy rating on HAL shares and raises its price target to $60 from $58 while lowering its EPS estimates for Q4 2013, FY 2013 and FY 2014.
- Management’s "less content-rich conversation" in its Q3 report leaves the stock waiting for the November analyst day, when Jefferies expects clarity on efficiency initiatives and growth paths; the firm continues to see HAL as a top pick based on multi-year prospects related to U.S. shale efficiency.
- Jefferies also raises its price target on Devon Energy (DVN +2%), to $74 from $71, noting that the combination of DVN's midstream assets with Crosstex adds ~$3/share to its NAV estimate, and future drop-downs could provide additional upside.
Oct. 21, 2013, 2:51 PM
- "It's an epic deal," R.W. Baird analyst Ethan Bellamy says of plans to combine Devon's (DVN +4.2%) midstream operations with Crosstex (XTXI +59.4%; XTEX +37.7%) to form a publicly traded MLP that will combine the companies' pipelines, processing plants, rail terminals and other oil and natural gas infrastructure.
- "Devon is getting out of the gates on their midstream standalone business much bigger and stronger and potentially at investment-grade status right away," the analyst says, adding the combination also is "fantastic" for Crosstex.
- The Devon-Crosstex combo will be larger and more formidable than DVN's midstream assets would be in its own company; DVN expects the new business to bring $700M in earnings in 2014 vs. $425M it had expected via a standalone MLP.
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