Devon Energy (DVN) Update - Sept 19

[dan_s]

I finished my review of the updated profile for Devon Energy profile today and it has been posted to the EPG website.

DVN closed today at $48.99. I have increased my valuation by $0.50 to $65.50.

TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for DVN. The average price target among the analysts is $60.23. The 14 price targets range from $50 to $79."

Devon Energy is one of the upstream oil & gas companies in our High Yield Income Portfolio. It pays variable dividends. Over the next twelve months the annualized dividend yield should be over 8%.

Devon is a classic "Growth + Income" stock that pays a nice dividend and generates annual production growth of 5% to 10%. They also use free cash flow to fund a decent stock buyback program designed to increase per share valuation.

The Company's quarterly dividends peaked after Q2 2022 at $1.55 per share, primarily due to the spike in their realized oil price after the Russian invasion of Ukraine. Dividends declined for four quarters to the low of $0.49 that was paid out in August based on Q2 2023 results, when Devon's realized oil price was down more than 25% year-over-year.

Timing is good on this one because oil prices are ramping up and so will Devon's dividends. The Company's production is on pace for year-over-year growth of more than 8% this year. Most of the growth is coming from their Permian Basin drilling program where well results are exceeding expectations.

Devon is a former Sweet 16 company that I have followed for over 20 years. I actually interviewed with them for a division CFO position in 2002 soon after I left Hess Corp.