Devon Energy (DVN) Valuation Update - May 8

[dan_s]

At the time of this post DVN was trading at $31.80.

I have updated my forecast/valuation model for Devon's solid Q1 results and their updated guidance, which did not change much.

I have lowered my current valuation by $3 to $50 per share, just because I have added more "cushion" to by 2H 2025 and 2026 operating cash flow forecasts due to the uncertainty of where oil prices will be in the future. I do expect oil prices to rebound after the Republicans pass the tax bill and FEAR of the Trade War fades, which is starting to happen.

My valuation is based on just 4.5 X annualized operating cash flow, which I believe is a conservative multiple for a large-cap of this quality.

TipRanks: "In the last 3 months, 22 ranked analysts set 12-month price targets for DVN. The average price target among the analysts is $42.05." < The 22 price targets range from $34 to $56. Seven analysts updated their price targets yesterday after Devon's conference call. Those seven price targets average $42.14.

Devon's hedging program and their production mix (~53% natural gas & NGLs) does insulate the Company from lower oil prices.

Devon is free cash flow positive as long as WTI oil price stays over $45/bbl.