Devon Energy = GREAT 3rd Quarter
Posted: Wed Nov 05, 2014 3:18 pm
Credit Suisse analyst Arun Jayaram and team call Devon’s quarter “transformational.” They explain why:
"Not only was Devon able to beat closely watched oil production expectations, but the company also raised its full-year production volumes at the same E&P capex. The new ops report read better than a Hemingway novel, with management reiterating its 2015 20-25% oil production growth target at similar E&P spend as in ’14, materially raising its Bone Spring type curve, announcing a prolific well in Martin County (200 locations), accelerating Eagle Ford completion activity, highlighting potential type curve and inventory increases in the Eagle Ford, raising its Cana-Woodford type curve, and signaling a meaningful dropdown was possible to EnLink beginning in early 2015. In our view, Devon is one of the most mispriced names in large cap E&P, with the E&P business trading at less than 4.0x EV/EBITDA.
Deutsche Bank’s Stepgen Richardson and team are equally excited about EOG Resources, which they call “best in class.” They explains why:
"3Q at EOG was as hotly debated as we can remember with true believers armed with state data challenging explicit company guidance. 3Q should put these fears to rest with a strong sequential US oil beat (~19 mbpd) which we understand was split equally between the Eagle Ford and other regions (Permian, Rockies). Bigger picture, EOG continues to define its competitive advantage relative to oil growth peers and we continue to see the diversification of oil growth in 2014+ as a key positive. In a market looking for the marginal barrel to ration, EOG provides ample evidence of a low cost leader with duration."
"Not only was Devon able to beat closely watched oil production expectations, but the company also raised its full-year production volumes at the same E&P capex. The new ops report read better than a Hemingway novel, with management reiterating its 2015 20-25% oil production growth target at similar E&P spend as in ’14, materially raising its Bone Spring type curve, announcing a prolific well in Martin County (200 locations), accelerating Eagle Ford completion activity, highlighting potential type curve and inventory increases in the Eagle Ford, raising its Cana-Woodford type curve, and signaling a meaningful dropdown was possible to EnLink beginning in early 2015. In our view, Devon is one of the most mispriced names in large cap E&P, with the E&P business trading at less than 4.0x EV/EBITDA.
Deutsche Bank’s Stepgen Richardson and team are equally excited about EOG Resources, which they call “best in class.” They explains why:
"3Q at EOG was as hotly debated as we can remember with true believers armed with state data challenging explicit company guidance. 3Q should put these fears to rest with a strong sequential US oil beat (~19 mbpd) which we understand was split equally between the Eagle Ford and other regions (Permian, Rockies). Bigger picture, EOG continues to define its competitive advantage relative to oil growth peers and we continue to see the diversification of oil growth in 2014+ as a key positive. In a market looking for the marginal barrel to ration, EOG provides ample evidence of a low cost leader with duration."