Tags: Devon | energy | price | DVN

Devon Benefits from Energy Price Ascent

By Dan Weil   |   Friday, 23 Dec 2011 10:23 AM

Devon Energy (DVN), based in Oklahoma City, stands as the third-largest independent oil and gas producer in the country. That’s a good spot to be in, given the relentless ascent of energy prices.

Devon’s choice accumulation of properties and pristine balance sheet make its shares an attractive proposition. It also offers a 1 percent dividend yield and has raised its dividend payout by more than 50 percent over the past five years.

Devon’s portfolio includes conventional and unconventional oil and natural gas properties throughout the United States and Canada and a significant network of midstream assets. The company has dumped about $10 billion of assets over the past two years, by Morningstar’s count.

It got rid of its offshore and foreign properties to focus on North American onshore properties. The $10 billion that Devon generated from the sales gives it plenty of firepower to develop the properties it holds.

These include significant stakes in the Permian Basin, the Barnett, Cana-Woodford, Horn River, and Haynesville shale plays, and two large Canadian oil sands projects.

Disappointing earnings

In the third quarter, Devon’s profit plunged 50 percent to $1 billion from $2.1 billion a year earlier. But revenue soared 49 percent to $3.5 billion.

Standard & Poor’s analyst Michael Kay gives Devon shares a four-star buy rating. But he tempered his enthusiasm after the company’s third-quarter earnings came in 15 percent below his estimates. Weaker-than-expected production and prices were responsible for the shortfall.

As a result, Kay cut hit his full-year 2011 earnings forecast by 12 percent and his 2012 forecast by 18 percent. He also lowered his price target for Devon shares by 16 percent to $84.

But that’s still 26 percent above recent levels. Kay confirms that he continues to find Devon shares “attractive.”

The company next reports Feb. 2.

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Devon Energy (DVN), based in Oklahoma City, stands as the third-largest independent oil and gas producer in the country. That s a good spot to be in, given the relentless ascent of energy prices. Devon s choice accumulation of properties and pristine balance sheet make its...
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