DEVON ENERGY CORP. $78.50 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235- 3611; www.dvn.com; Shares outstanding: 407.9 million; Market cap: $31.9 billion; Dividend yield: 1.2%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 53% gas and 47% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop.
The company is narrowing its focus even further with its recent agreement to sell some of its properties to Linn Energy LLC for $2.3 billion. The sale includes Devon’s holdings in the Rockies, the onshore Gulf Coast and the Mid-Continent region (which includes Oklahoma, Kansas and Texas).
The sale will let Devon focus on what it views as low-risk/high-reward properties, especially the oilproducing assets it bought in Texas’s Eagle Ford shale formation for $6 billion last year.
As well, 80% of the production from the properties Devon sold is natural gas, so the sale will let the company continue to shift its focus to oil from gas.
Meanwhile, the company’s daily output averaged 690,900 barrels of oil equivalent in the quarter ended March 31, 2014, up slightly from 686,900 a year earlier. Cash flow per share jumped 41.1%, to $4.02 from $2.85, on increased oil and gas prices.
The company’s $11.7 billion of debt is a manageable 36.7% of its market cap. It also holds cash of $2.0 billion, or $4.90 a share.
The stock trades at 4.9 times Devon’s annual cash flow of $16.08 a share, based on the latest quarter. The company raised its quarterly dividend by 9.1%, to $0.24 from $0.22, with the June 2014 payment. The stock now yields 1.2%.
Devon Energy is a buy.
