Devon Energy (DVN) Valuation Update - Aug 2

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Devon Energy (DVN) Valuation Update - Aug 2

Post by dan_s »

DVN is currently trading at $61. My valuation increases by $5 to $94. Devon offers investors a high yield dividend plus significant share price upside.

Why?
Solid Q2 results beat my forecast and they've increased their production guidance for 2022 < RimRock Acq should push production above guidance.
I raised my valuation multiple from 7.0 to 7.5 X annualized operating cash flow per share
Four analysts have adjusted their price targets since Devon released Q2 results to $70, $70, $94 and $98

Devon is raising its full-year 2022 production forecast by 3 percent to a range of 600,000 to 610,000 Boe per day. The improved
volume outlook is due to better-than-expected well performance year-to-date and the impact from a bolt-on acquisition in the
Williston Basin. With the ongoing share repurchase program, production per share is expected to grow 8 percent compared to
2021.
The company also adjusted its upstream capital guidance to a range of $2.2 billion to $2.4 billion versus prior guidance of
approximately $2.1 billion. This updated outlook incorporates $100 million of incremental capital related to the acquisition in
the Williston Basin and the impact of inflationary cost pressures. Devon expects its capital to be fully funded from operating
cash flow, which is forecasted to be nearly $9 billion at current strip pricing.
< Based on my forecast model, operating cash flow should be approximately $9.2 billion.

My updated forecast/valuation model has been posted to the EPG website.
Dan Steffens
Energy Prospectus Group
Fraser921
Posts: 2955
Joined: Mon Mar 22, 2021 11:48 am

Re: Devon Energy (DVN) Valuation Update - Aug 2

Post by Fraser921 »

conf call about to begin at 11 est
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Devon Energy (DVN) Valuation Update - Aug 2

Post by dan_s »

Note from Stifel

Devon Energy Corporation (DVN, $61.57, Buy; Target $87.00) - Announces
quarterly beat and over 10% annualized dividend yield - Derrick Whitfield
- We
view this release as slightly positive. The positives include: i) a quarterly production
beat (1.9% above on oil), ii) lower than expected quarterly capex, and iii) an
annualized fixed-plus-variable dividend yield of over 10% in addition to an active share
repurchase program. The negatives include: i) lower than expect Q322 oil production
guidance, and ii) higher than expected Q322 capex guidance. We note the company's
recently closed RimRock acquisition and timing of wells to sales impact comparisons
to consensus for 2H22 capex and production. Net-net, Devon's strong quarter and
value proposition should outweigh noisy guidance for 2H22.
Dan Steffens
Energy Prospectus Group
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