Devon Energy (DVN) Update - Nov 11

[dan_s]

Note below from Raymond James Energy Sector Research Team
Raymond James Upgrade: Devon Energy Corporation
Generates Meaningful 2021 FCF at $40+; Reiterate Outperform
DVN-NYSE | $11.76 $15.00 target

Devon delivered a strong operational quarter, reporting beats on liquids volumes coupled with opex below RJ expectations. DVN raised oil volume guidance 1% to 152-154 Mbo/d (RJE/consensus: 150 Mbo/d, 4Q20 oil guidance increased 7 Mbo/d to 148-153 Mbo/d).
With the closing of the WPX acquisition in 1Q21, we're encouraged by the progress DVN continues to make on capital/operational efficiency. With continued uncertainty in the strip, focus on FCF and integration of WPX, we anticipate DVN opts for maintenance mode in 2021. Under $40 WTI, our updated estimates suggest FCF of ~$570M, which is more than sufficient to cover the pro-forma annual dividend expense of ~$296M, providing reasonable flexibility for the variable dividend.
We reiterate our Outperform rating and are raising our target price to $15/share after updating estimates.