Devon (DVN) Running Lean and Positioned for Growth - Barron's
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Price: $44.61 -4.27%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 9.1%
EPS Growth %: +91.7%
Overall Analyst Rating:
SELL (= Flat)
Dividend Yield: 9.1%
EPS Growth %: +91.7%
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Devon Energy (NYSE: DVN) is trading higher today following an article published over the weekend in Barron's, which bills the Oklahoma City, OK-based energy company as undervalued when compared to its peers.
Barron's notes how Wall Street isn't giving DVN enough credit for some moves it made, which could boost reserves and profits over the coming years. Last year, the company sold its international properties and Gulf holdings for a post-tax price of $8 billion. DVN has proved reserves of 2.6 billion BOE, with crude oil and gas liquids accounting for 40% of proved reserves, and nat gas for the other 60%.
Production out of the company is expected to increase 6% - 8% next year, with most of the focus on higher-margin gas liquids. Barron's notes that analysts are expecting FY10 EPS of $6, which could jump 32% by 2012 to $7.92.
Shares still have room to grow, trading at just 14x FY11 EPS estimates, compared to the industry's average of 19x. Additionally, Devon carries an enterprise value-to-EBITDA of 6x, compared to 6.8x for Chesapeake Energy (NYSE: CHK) and 7.8x at Anadarko (NYSE: APC).
Devon has one of the biggest positions in the Barnett Shale in Texas, with significant presences in Permian Basin, Haynesville, and other plays. They have also partnered with BP plc (NYSE: BP) in a Canadian joint venture, which could ramp up production in its Canadian oil plays from 30,000 barrels per day now to over 150,000 barrels per day in about nine years.
Devon also has a strong balance sheet when compared to peers. For example, the company has a long-term debt-to-total capital ratio of 17%, compared to 43% for Chesapeake.
The company also bought back $1 billion in stock last year, which CEO John Richels said amounted to paying about $13 per barrel of proved reserves, a discount when compared to the industry average of $20 per barrel. The number doesn't include potential in new and untapped fields.
Devon also pays out a $0.16 quarterly dividend, which yields 0.7% at current price levels. The stock is trading 2.6% better today.
Barron's notes how Wall Street isn't giving DVN enough credit for some moves it made, which could boost reserves and profits over the coming years. Last year, the company sold its international properties and Gulf holdings for a post-tax price of $8 billion. DVN has proved reserves of 2.6 billion BOE, with crude oil and gas liquids accounting for 40% of proved reserves, and nat gas for the other 60%.
Production out of the company is expected to increase 6% - 8% next year, with most of the focus on higher-margin gas liquids. Barron's notes that analysts are expecting FY10 EPS of $6, which could jump 32% by 2012 to $7.92.
Shares still have room to grow, trading at just 14x FY11 EPS estimates, compared to the industry's average of 19x. Additionally, Devon carries an enterprise value-to-EBITDA of 6x, compared to 6.8x for Chesapeake Energy (NYSE: CHK) and 7.8x at Anadarko (NYSE: APC).
Devon has one of the biggest positions in the Barnett Shale in Texas, with significant presences in Permian Basin, Haynesville, and other plays. They have also partnered with BP plc (NYSE: BP) in a Canadian joint venture, which could ramp up production in its Canadian oil plays from 30,000 barrels per day now to over 150,000 barrels per day in about nine years.
Devon also has a strong balance sheet when compared to peers. For example, the company has a long-term debt-to-total capital ratio of 17%, compared to 43% for Chesapeake.
The company also bought back $1 billion in stock last year, which CEO John Richels said amounted to paying about $13 per barrel of proved reserves, a discount when compared to the industry average of $20 per barrel. The number doesn't include potential in new and untapped fields.
Devon also pays out a $0.16 quarterly dividend, which yields 0.7% at current price levels. The stock is trading 2.6% better today.
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