DEVON ENERGY CORP. $71.70 - New York symbol DVN

DEVON ENERGY CORP. $71.70 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235-3611; www.dvn.com; Shares outstanding: 403.9 million; Market cap: $29.0 billion; Dividend yield: 1.0%) is one of the largest U.S.-based oil and natural-gas explorers and producers. Its production mix is 65% gas and 35% oil.

In May 2011, Devon completed the sale of its Brazilian operations for $3.2 billion. It has now sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.

In all, the company received over $8 billion in after-tax proceeds from these sales. It’s using these funds to buy back shares, purchase properties and pay down debt. So far, it has bought back $3.5 billion of its shares. Its long-term debt is $6.0 billion, but that’s just 20.7% of its $29.0-billion market cap. The company holds cash of $7.1 billion, or $17.27 a share. As well, Devon recently sold a one-third interest in five shale oil and gas fields to giant Chinese state-owned petroleum and chemical company Sinopec (symbol SNP on New York) for $900 million. In addition, Sinopec will pay up to 70% of Devon’s share of the development costs at the five fields, up to $1.6 billion

In the three months ended December 31, 2011, Devon’s daily production averaged 680,400 barrels of oil equivalent, up 10.0% from a year earlier. Cash flow per share rose 3.2%, to $3.91 from $3.79.

Devon is now focused on its North American properties, which include conventional production, shale oil in Texas and oil sands in Alberta. The company will spend as much as $5.9 billion to explore and develop its properties this year.

The shares trade at 5.7 times the company’s forecast 2012 cash flow of $12.55 a share. Devon has raised its dividend by 17.6%, and now yields 1.0%.

Devon Energy is a buy.

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