- Devon Energy's Eagle Ford operations will grow its company-wide oil production by at least 6.9% this year.
- Exploration upside in the Upper and Lower intervals in the Eagle Ford could yield a bigger drilling inventory and more resource potential.
- In Q3, Devon spud its first well targeting the Upper Eagle Ford interval.
- Next time Devon updates investors, look for the production data from its first three wells targeting the Upper Eagle Ford.
Devon Energy: Enhanced Permian Operations Equals Better Drilling Economics
- Early results from Devon Energy's new completion design in the Bone Spring formation are very promising.
- 30-day IP rates were on average 56.5% above previous type curve estimates, which management noted will most likely translate into higher EUR rates.
- As Devon boosts its EUR and 30-day IP rates, it's enhancing its drilling economics in the Permian.
- Downspacing tests in the first half of 2015 could grow Devon's huge drilling inventory in the play.
- The business mix of the company gives it an edge in the current market conditions.
- The diversification of the revenue mix decreases the dependence on the commodity prices.
- The midstream and marketing segment has been growing exceptionally, which should give it some protection against falling crude prices.
- Strong hedge position is needed for any company to weather this short-term storm in the commodities market.
- Devon Energy's stock price has fallen right alongside oil prices, but strong oil production growth this year makes this E&P player a good buy.
- Ramping up production at its Jackfish 3 facility will account for roughly half of Devon's oil production growth this year.
- Each SAGD operation could produce at the peak rate of 35,000 bo/d for over two decades.
- It's possible that Devon will produce more oil than expected from its Canadian operations, as its Jackfish 1 facility is exceeding "name-plate" capacity.
- A decent hedging program combined with over two decades of production will allow Devon to ride out low oil prices this year.
Despite Plunging Energy Prices, Devon Energy Is Still A Buy
- Devon has locked in both oil and natural gas production through 2015 at prices well above current levels, which will help ensure profitability going forward.
- Devon is still planning 20%-25% production increases in its Permian Basin and Eagle Ford acreages. Devon's additional Eagle Ford acreage purchase is looking like a real steal at this point.
- Devon continued to divest itself of non-core assets in 2014 to focus on North American oil production.
- Fundamentally, Devon still appears relatively cheap compared to peers and the broader market based on P/E, P/B, and PEG ratio measures.
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.
Devon Should Benefit From The Demand For Midstream Assets
- 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.
Wed, Jan. 21, 3:59 PM
- Credit Suisse thinks it is still too early to buy E&P equities but the picture should brighten by late in Q1, when the firm suggests the time could be right to make a play for the strong balance sheets offered by the likes of Anadarko Petroleum (NYSE:APC), Devon Energy (NYSE:DVN), EOG Resources (NYSE:EOG), Marathon Oil (NYSE:MRO) and Pioneer Natural Resources (NYSE:PXD).
- E&P stocks historically have been highly anticipatory, the firm says, with the stocks moving ahead of crude oil, adding that the key leading indicator of U.S. drilling and completion activity is U.S. drilling permits.
Wed, Jan. 14, 2:35 PM
- Barclays downgrades the large-cap E&P sector to Negative from Neutral and the small- and mid-cap E&P group to Negative from Positive, arguing that downside risk outweigh potential gains even if oil prices recover.
- Equity investors are pricing in WTI crude assumptions of close to $75/bbl in 2016 compared to current strip prices of ~$57, Barclays says, also noting that an abundance of relatively cheap oil supply from U.S. producers could further delay a price recovery.
- Among specific names, the firm downgrades CHK, SD, REN and HK to Underweight; DVN, CLR, KOS, MRO, RSPP and WLL are cut to equal weight.
- At the same time, Barclays picked a few favorites, upgrading Range Resources (NYSE:RRC) to Overweight from Equal Weight, and maintained Overweight ratings on large-cap E&P companies CNQ, EOG and NBL; among small- and mid-cap E&P names, the firm favors AR, CXO and XEC.
- ETFs: XOP, IEO, PXE
Mon, Jan. 12, 12:28 PM
- Wolfe Research’s Paul Sankey prefers EOG Resources (EOG -4%) as the best positioned among well exposed U.S. unconventional energy players that have the balance sheet to survive the current volatility.
- ConocoPhillips (COP -2.8%) has terrific unconventional exposure but enforced capital discipline that effectively forces the company to return cash to shareholders and shrink its size in an orderly manner.
- On Devon Energy (DVN -2.1%): "If EOG is the new Saudi Arabia of global oil, then Devon Energy is its Kuwait."
Sat, Jan. 10, 8:25 AM
- Kinder Morgan (NYSE:KMI) tops Credit Suisse's list of its nine favorite energy and utility stocks to own for 2015, believing KMI’s recent MLP acquisitions will lower the company’s cost of capital and open the door for double-digit dividend growth and additional potential acquisitions.
- Noble Corp. (NYSE:NE) is the top pick among offshore drillers, despite the fact that analysts don’t believe the inflection point in the drilling down-cycle is coming until at least 2016; fulfilling the firm's $30 price target would mean nearly 90% upside.
- Also recommended: SUNE, EXC, RDS.A, RDS.B, TSO, DVN, PDCE, SLB.
- SandRidge Energy (NYSE:SD) is one of Credit Suisse's five energy and utility stocks to avoid despite an upbeat quarterly report, believing the risk associated with SD’s extremely high leverage likely will lead to significant capex cuts, thus limiting production growth and cash flows.
- The firm also would avoid CVRR, SFY, YGE and SO.
Wed, Jan. 7, 7:35 PM
- Energy bonds have become one of the riskiest sectors in the bond market, as the cost of buying five-year credit default swaps protecting $10M of bonds has jumped from $139K/year last June to $377K today for companies in the S&P/ISDA CDS U.S. Energy Select 10 Index.
- The index consists of 10 large major energy companies: APC, APA, CHK, COP, DVN, OTCQB:FSTO, HAL, BTU, VLO and WMB.
- Even though most of the companies boast investment-grade ratings, it now costs more to insure bonds in that index against default than it costs to insure bonds of an average junk-rated company, according to S&P.
Wed, Jan. 7, 12:39 PM
- BofA Merrill recommends that clients stay defensive on oil stocks and become more positive on natural gas names, highlighting four natural gas stocks and two oil stocks to consider.
- Range Resources (NYSE:RRC) is called a top stock to buy for possible gains in natural gas after shares have slumped 40% since July, especially with the possibility of continued harsh winter weather; the firm also likes Southwestern Energy (NYSE:SWN), Devon Energy (NYSE:DVN) and Memorial Resource Development (NASDAQ:MRD).
- Occidental Petroleum (NYSE:OXY) and Hess (NYSE:HES) are BofA's top oil stocks to buy, and are on the firm's US1 list.
Mon, Jan. 5, 12:18 PM
- Energy stocks severely underperform the broader market, with the sector -4.2% vs. the S&P 500's -1.4%, as U.S. oil prices briefly slip below $50/bbl for the first time since April 2009; Nymex crude recently was -4.4% at $50.37, while Brent crude -5.9% at $53.08.
- Among the day's biggest losers: DNR -9%, RIG -7.6%, NBR -4.8%, CHK -5.9%, SDRL -9.1%, SD -12.3%, NOV -5.9%, PSX -6.2%, APA -5.9%, DVN -4.4%, EOG -6%, SU -5.2%, OXY -4.2%, APC -8.7%, PWE -9%, ECA -5.5%, MRO -5.3%.
- Global oil majors, which have been seen as less vulnerable to falling oil prices, are posting big losses: XOM -2.7%, COP -4.5%, CVX -3.8%, BP -5.8%, RDS.A -4.6%, TOT -6.5%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, XOP, ERY, FCG, DIG, PBW, BNO, GASL, DTO, DBO, DUG, IYE, XES, IEO, QCLN, IEZ, UWTI, PXE, USL, PXI, FENY, DWTI, PXJ, DNO, PSCE, RYE, SZO, PUW, FXN, OLO, DDG, HECO, TWTI, OLEM
Dec. 22, 2014, 10:45 AM
- Natural gas prices fall 9.5% to near two-year lows at $3.133/mmBtu, in the biggest one-day percentage loss since February and the lowest intraday price since January 2013, on mild weather forecasts and inventory that is above year-ago levels.
- Prices are now down more than 15% in three straight losing sessions and are 30% lower than the six-month high closing price of $4.489/mmBtu it hit just a month ago.
- Weather has been unseasonably warm for December, limiting demand for home heating and allowing relatively low stockpiles to catch up to where they were a year ago and encouraging traders to sell based on the belief that supply is relatively healthy.
- Gas producers are among the biggest early decliners: XOM -1.1%, CHK -7.3%, APC -2.6%, SWN -6%, DVN -2.2%, COP -2.3%, BP -1.5%, COG -4%, BHP -1.9%, CVX -1.3%, ECA -5.1%, EQT -4.3%, RDS.A -1.7%, UPL -12%, WPX -6.9%, EOG -1%, OXY -1.1%, RRC -6.1%, APA -2.3%, AR -3.2%, CNX -3%, QEP -4.8%, LINE -4.9%, NBL -1.6%, SM -2.6%, XEC -4.2%, PXD -2.9%, NFX -5.1%.
- ETFs: UNG, DGAZ, UGAZ, BOIL, GAZ, FCG, GASL, KOLD, UNL, NAGS, DCNG
Dec. 16, 2014, 7:21 PM
- "Low oil prices cure low oil prices,” meaning that low oil prices will take supply off line - primarily shale oil production in North America - and eventually prices will recover; if that maxim becomes reality, then it could be time pick up select energy stocks today at cheap prices, some analysts say.
- U.S. Global Investors' Brian Hicks, who believes oil is oversold, favors Devon Energy (NYSE:DVN) for its low-cost Eagle Ford acreage purchased earlier this year, solid cash flow, and significant hedges in place on 2015 production; he also likes oil services companies Noble Corp. (NYSE:NE) and Helmerich & Payne (NYSE:HP).
- Hodges Capital's Michael Breard likes North American oil producers that have the flexibility to shift to natural gas - where prices are more likely to hold up, he says - such as Matador Resources (NYSE:MTDR), Comstock Resources (NYSE:CRK) and Panhandle Oil and Gas (NYSE:PHX).
- Deutsche Bank analysts like companies with the balance sheet strength to survive, but also the budget flexibility, asset quality and performance record to suggest they can return to growth when energy prices go back up, including Anadarko (NYSE:APC), EOG Resources (NYSE:EOG), Cimarex (NYSE:XEC) and Concho Resources (NYSE:CXO).
Dec. 3, 2014, 4:37 PM
- Devon Energy (NYSE:DVN) says President and CEO John Richels will retire effective July 31, 2015, to be succeeded by current COO Dave Hager.
- Richels will become Vice Chairman effective immediately, with the intent of replacing Larry Nichols as Chairman upon Nichols' retirement from the board in 2016.
- Hager has been an officer at DVN since 2009 and a member of the board since 2007, and brings 35 years of experience in the oil and gas industry to his new position.
Dec. 3, 2014, 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.
Dec. 3, 2014, 11:09 AM
Dec. 2, 2014, 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."
Nov. 12, 2014, 6:45 PM
- Whether or not there is an oil "price war," the U.S. shale industry is flinching only a little, essentially committing to concentrate their efforts where they will be most effective rather than admit defeat, according to an FT report.
- To be sure, activity is starting to slow: Continental Resources (NYSE:CLR), Rosetta Resources (NASDAQ:ROSE) and ConocoPhillips (NYSE:COP) are among leading shale oil companies that have announced reductions in their capital spending plans, and EOG suggested as much last week when it said it would make sure its capital spending plus dividend payments were in line with the cash flow it has coming in.
- If statements from shale industry leaders are even broadly accurate, oil prices may have to go much lower before U.S. oil production starts to fall; EOG CEO William Thomas says that even if oil fell to $40, his company could still earn a 10% return in some areas, such as the Bakken and Eagle Ford.
- Although they may be drilling less than they had expected, oil companies also will focus on maximizing production from the rigs they are already using, which encourages continued expectations for output growth from the likes of Devon Energy (NYSE:DVN), EOG, CLR and Pioneer Natural (NYSE:PXD).
Nov. 11, 2014, 2:52 PM
- Count BofA's Doug Leggate among analysts seeing an opportunity to become contrarian bullish on the energy sector, which he says is now discounting $75 oil.
- His top picks in the sector are Occidental Petroleum (NYSE:OXY) and Hess (NYSE:HES), while Anadarko Petroleum (NYSE:APC) and Devon Energy (NYSE:DVN) justify another look; also, pure play gas names Cabot Oil & Gas (NYSE:COG), Range Resources (NYSE:RRC) and Southwestern Energy (NYSE:SWN) remain Buy rated.
- On the technical side, BofA's Stephen Suttmeier notes the sector hit capitulation levels in mid-October not seen since 2002, suggesting the worst is over and energy is poised to build a base and head higher.
- Earlier: Top energy stocks may have bottomed even if oil has not, J.P. Morgan says.
Nov. 5, 2014, 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.
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