Devon Energy (DVN) Valuation Update - Aug 2
Posted: Tue Aug 02, 2022 8:38 am
DVN is currently trading at $61. My valuation increases by $5 to $94. Devon offers investors a high yield dividend plus significant share price upside.
Why?
Solid Q2 results beat my forecast and they've increased their production guidance for 2022 < RimRock Acq should push production above guidance.
I raised my valuation multiple from 7.0 to 7.5 X annualized operating cash flow per share
Four analysts have adjusted their price targets since Devon released Q2 results to $70, $70, $94 and $98
Devon is raising its full-year 2022 production forecast by 3 percent to a range of 600,000 to 610,000 Boe per day. The improved
volume outlook is due to better-than-expected well performance year-to-date and the impact from a bolt-on acquisition in the
Williston Basin. With the ongoing share repurchase program, production per share is expected to grow 8 percent compared to
2021.
The company also adjusted its upstream capital guidance to a range of $2.2 billion to $2.4 billion versus prior guidance of
approximately $2.1 billion. This updated outlook incorporates $100 million of incremental capital related to the acquisition in
the Williston Basin and the impact of inflationary cost pressures. Devon expects its capital to be fully funded from operating
cash flow, which is forecasted to be nearly $9 billion at current strip pricing.
< Based on my forecast model, operating cash flow should be approximately $9.2 billion.
My updated forecast/valuation model has been posted to the EPG website.
Why?
Solid Q2 results beat my forecast and they've increased their production guidance for 2022 < RimRock Acq should push production above guidance.
I raised my valuation multiple from 7.0 to 7.5 X annualized operating cash flow per share
Four analysts have adjusted their price targets since Devon released Q2 results to $70, $70, $94 and $98
Devon is raising its full-year 2022 production forecast by 3 percent to a range of 600,000 to 610,000 Boe per day. The improved
volume outlook is due to better-than-expected well performance year-to-date and the impact from a bolt-on acquisition in the
Williston Basin. With the ongoing share repurchase program, production per share is expected to grow 8 percent compared to
2021.
The company also adjusted its upstream capital guidance to a range of $2.2 billion to $2.4 billion versus prior guidance of
approximately $2.1 billion. This updated outlook incorporates $100 million of incremental capital related to the acquisition in
the Williston Basin and the impact of inflationary cost pressures. Devon expects its capital to be fully funded from operating
cash flow, which is forecasted to be nearly $9 billion at current strip pricing.
< Based on my forecast model, operating cash flow should be approximately $9.2 billion.
My updated forecast/valuation model has been posted to the EPG website.