Devon Energy (DVN) Update - Sept 14

[dan_s]

TPH Update 9-14-2018:
"Company announced this morning the completion of the initial phase of its accelerated share repurchase (“ASR”) program with 50MM shares purchased for $2B or $41/shr (~10% of pre-authorization shares outstanding). The company expects to repurchase an additional $500MM before its Q3 earnings call and to complete the $4B total authorization in early '19 vs. H1'19 previously, stating that they are on track to repurchase nearly 20% of shares outstanding. As highlighted in our recent “Growing Up Was Hard To Do” report, we see DVN's recent shareholder returns initiatives as sustainable, with running room for the company to buyback an additional ~20% of shares through 2025 with FCF while also increasing the dividend to an S&P yield by 2020 with 20% growth/yr thereafter. Additionally, asset sales should be able to juice shareholder returns as we see DVN exiting its Barnett, Eagle Ford and Heavy Oil assets in the fullness of time given portfolio depth in its core assets, which could fetch $8-9B of proceeds over the next several years. Continue to see DVN as a top large-cap value pick."

TPH's target price is $52/share

I still like Devon a lot. I dropped it from the Sweet 16 because the Sweet 16 is a Growth Portfolio and Devon is getting a lot smaller. It may take until 2020 before we know for sure what Devon will be going forward, but if they can get good prices on their asset sales the company should be in great shape heading into the next decade. - Dan