In a report published Wednesday, May 20 Imperial Capital analyst Bob Christensen initiated coverage of Devon Energy Corp. (NYSE: DVN) with an Outperform rating and price target of $92. The analysts believe that the company's Permian oil plays could offer double digit growth for several decades. [My Fair Value Estimate is $86.75/share, compared to First Call's price target of $75.09. - Dan]
Over the past two years, the company has undertaken several large divestiture and acquisition deals, including the creation of a publicly traded midstream master limited partnership, EnLink. The analysts believe that these transactions have not only transformed the company but also focused its production and reserves to onshore crude oil and liquids in North America. Devon Energy is now one of the very few E&P companies that have a midstream master limited partnership.
"All of DVN's large North American plays are top-tier in terms of quality acreage in our opinion," the analysts said, while adding that "its five largest plays are sizeable enough to move the needle for a company as large as DVN, which is currently producing 665,000boepd. It is also important from a focus of capital and focus of personnel standpoint to maximize returns and generate sustainable long term growth." [First quarter production was actually 685,167 boepd and it should be drifting higher all year. - Dan]
According to the Imperial Capital report, the company's top-tier assets are expected to drive production growth of 10 percent to 20 percent per annum over the next five years.
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We will be sending out an updated profile on Devon early next week.
Devon Energy - one of the "Elite Eight"
Devon Energy - one of the "Elite Eight"
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group