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4 Cookies From Devon Energy

Callum Turcan profile picture
Callum Turcan


  • Four favorable pieces of news out of Devon Energy Corporation.
  • Debt reduction, a truly non-core asset sale, a dividend increase, and share buybacks.
  • Going over Devon Energy Corporation's latest news.

On March 7, after the brutal trading weeks following Devon Energy Corporation’s (NYSE:NYSE:DVN) latest earnings report, management offered investors four cookies. The first cookie was a 33% bump in its quarterly dividend to eight cents a share, good for a modest 1% yield at current prices. Devon Energy Corporation also decided to initiate a $1 billion share buyback program that will be completed over the next 12 months, equal to 6% of its outstanding shares at current prices.

Management is also cognizant of the need for Devon Energy Corporation to further pare down its debt load, which is why the firm launched a tender offer to buy back $1 billion of its notes. A truly non-core divestment is helping fund these endeavors. Let’s dig in.

Another divestment

Devon Energy Corporation announced that it just sold off part of its Barnett shale position, a Tier 3 natural gas play in Texas, for $553 million. The company is selling producing properties in Johnson County, TX. That acreage is currently pumping 200 million net cubic feet of natural gas equivalent (meaning some natural gas liquids is produced alongside dry gas), and was estimated to produce $100 million in cash flow this year before including overhead costs.

Devon is losing some cash flow, but it's worth mentioning that its Barnett shale output has been steadily trending lower over the past few years and will continue to do so without meaningful capital expenditures being allocated to the region. Economical development opportunities in the Barnett are largely limited to refracking old wells with new completion methods to boost EUR (estimated ultimate recovery) rates, and those types of projects still require higher natural gas prices to make sense.

The Barnett play just isn’t economical unless Henry Hub is closer to $4/Mcf (well above strip), and it isn’t competitive with other

This article was written by

Callum Turcan profile picture
Worked as an equity analyst for several years in the USA and have been writing financial articles and analyzing publicly traded companies for more than a decade.

Analyst’s Disclosure: I am/we are long DVN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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