Devon Energy (DVN) - Update

[dan_s]

In the last 3 months, 11 ranked analysts set 12-month price targets for DVN. The average price target among the analysts is $46.36. Price targets range from $38 to $63.

DVN closed at $41.40 on 12/29.

I have updated my forecast/valuation model for Devon and it will be posted to the EPG website this afternoon. My valuation increases by $13.50 to $67.50.

Things to remember about Devon:
> The company went though a major transition in 2015 & 2016. Selling lots of non-core assets to shore up the balance sheet and focus more attention on STACK.
> During periods when the sector is out of favor on Wall Street, the companies "in transition" get little attention. Devon should draw a lot more attention in 2018.
> Devon is a big company. It will generate over $3.1 Billion of cash flow from operations in 2017 and should generate at least $3.5 Billion in cash flow from operations in 2018.
> They have announced a 2018 capital program of $2.0 to $2.5 Billion. It will be at the top of that range if WTI oil prices stay over $50/bbl.
> This is more of a "Value Play" than a "Growth Stock"; although production should grow by approximately 10% annually in 2018 and in 2019.
> This is true for all of the Elite Eight >>> They all get a big benefit from the lower corporate tax rates. It will be interesting to see how they account for the change in Q4.
> Devon's primary focus areas are the Delaware Basin and STACK, where they have over 30,000 low-risk high-return development drilling locations.
> Devon has a big stake in EnLInk, one of the midstream MLPs in our High Yield Income Portfolio. EnLink will make cash distributions to Devon of over $800 million per year.
> They have a new PowerPoint presentation on their website. Review it carefully before investing.

Devon is one of the Elite Eight and should be a Core Holding in most energy sector portfolios.