DEVON ENERGY CORP. $61.81 - New York symbol DVN

DEVON ENERGY CORP. $61.81 (New York symbol DVN; SI Rating: Speculative) (405-235-3611; www.devonenergy.com; Shares outstanding: 443.9 million; Market cap: $27.4 billion) is one of the largest independent U.S.-based oil and gas explorers and producers. Its production mix is about 66% gas and 34% oil. Devon’s properties are mainly located in the United States and Canada. Aside from conventional production, they include shale oil in northern Texas, oil sands in Canada and deep-water wells in the Gulf of Mexico. In the three months ended March 31, 2009, Devon’s cash flow fell 60.8%, to $959 million, or $2.16 a share, from $2.4 billion, or $5.50 a share. The sharp drop was the result of lower oil and gas prices. A 7% rise in production was not enough to offset the price declines. Devon produced 2.7 billion cubic feet per day of natural gas (453,000 barrels of oil equivalent) and 231,600 barrels of oil per day. Devon’s shares trade at 5.4 times this year’s forecast cash flow of $11.50 a share. Its $5.9-billion debt is a low 22% of its market cap. Devon plans to spend $3 billion on exploration and development this year. The company’s diverse production and prospects, mostly in stable North America, could make it a takeover target for a bigger oil firm. That’s not reason enough to buy the stock, but it adds to its appeal. Devon Energy is a buy.

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