Energy Prospectus

Devon Energy's total companywide net production averaged 563,000 oil-equivalent barrels (Boe) per day in the first quarter. This compares to my forecast of 547,000 Boepd.

The company’s midstream business generated $207 million of operating profit in the first quarter, driven entirely by Devon’s strategic investment in EnLink Midstream. Devon has a 64 percent ownership in EnLink’s general partner (ENLC) and a 24 percent interest in the limited partner (ENLK). In aggregate, the company’s ownership in EnLink has a market value of approximately $4 billion and is expected to generate cash distributions of approximately $270 million annually.

Devon’s reported net earnings totaled $565 million or $1.07 per diluted share in the first quarter. Adjusting for items securities analysts typically exclude from their published estimates, the company’s core earnings totaled $217 million or $0.41 per diluted share in the first quarter. This compares to my EPS forecast of $0.34.

I am updating my forecast model now and will have it posted to the EPG website later today (5/3).

Very important to how I value a stock, Devon's operating cash flow per share in Q1 was $1.51. This compares to my forecast of $1.35.

Devon's realized oil price for Q1 was a bit under my forecast, but their realized ngas and NGL prices were higher.

Canadian production will dip in the 2nd quarter because they are doing a turnaround maintenance at Jackfish. U.S. production is growing much faster than expected.

I have update my forecast model for DVN. My valuation remains $64.00, although I have more confidence in the forecast. First Call's price target is $53.24, but should go up after analysts submit new forecast to Reuters. It takes about two weeks.

First Call's price targets are just the average of all the analysts' forecasts submitted to Reuters. In addition to stock price targets, you can see revenue, EPS and CFPS forecasts. You can find Frist Call info on Yahoo Finance. I use E-Trade, which does a good job of showing it for several years. Most important to me are the operating cash flow per share ("CFPS") forecasts because that is a much better way of seeing how well an upstream company is doing than looking at EPS forecasts.

GAAP EPS and Adjusted EPS are often widely different. This is very confusing to most investors. Focus on CFPS, not EPS. "Cash pays the bills" and this is an extremely cash intensive business. Devon is on-track to generate ~$3.3 Billion in cash flow from operations in 2017, which is more than enough to cover their Capex program for this year. I hope that they use it to accelerate their drilling program in STACK, where they are getting outstanding results.

On the forecast model spreadsheet you will find a red box that shows CFPS forecast for several years. If you cannot understand anything else on the forecast models, learn to look for the red box.

Read this: http://www.oilandgas360.com/eagle-ford- ... -devon-q1/