Devon Energy Corp. (NYSE:DVN) reported its second-quarter results after the closing bell on Tuesday. Despite the persistently weak oil market, Devon's results were exceptional, as the company made significant progress reducing costs. That's giving the company the confidence to reiterate its full-year production growth guidance.
Read: http://www.fool.com/investing/general/2 ... lnk0000001
Devon is the perfect example of why investors need to ignore reported earnings and focus on cash flow from operations. Devon's operating cash flow went from $1.268 Billion in Q1 to $1.406 Billion in Q2. The company is on-track to generate over $5 billion in cash flow from operations this year, even with today's low oil and gas prices. This compares to a capital program of $4.1 Billion. Devon is growing production & proven reserves and they are doing it totally from cash flow.
Devon is one of the "Elite Eight" in the Sweet 16 Growth Portfolio. I have updated my forecast model for DVN and it will be posted to the EPG website late today. I am raising my valuation by $5.00/share to $80.00. This compares to First Call's price target of $72.59.
It is important to note that Devon produces a lot of natural gas and NGLs. I think there is a good chance that natural gas prices are much higher this winter.
Devon Energy (DVN)
Devon Energy (DVN)
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group