On Nov 22, we maintained our Neutral recommendation on the
independent oil & gas operator,
Devon Energy Corporation
). Devon Energy currently has a Zacks Rank #3 (Hold).
BONANZA CREEK (BCEI): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis
MATADOR RESOURC (MTDR): Free Stock Analysis
SM ENERGY CO (SM): Free Stock Analysis Report
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Why the Reiteration?
Devon Energy's earnings in the third quarter exceeded the Zacks
Consensus Estimate and year-ago results, primarily due to higher
production and better realized prices of the product sold.
Devon Energy is presently more focused on oil and liquid
generation, which are its highest margin products. The company
decided to acquire GeoSouthern Energy to enhance its footprint in
the Eagle Ford shale. The GeoSouthern Energy assets, located in a
high reserve content region of the shale, will boost the reserve
and production capability of the company.
The company has also decided to form a midstream MLP business
along with Crosstex. The emphasis on the development of midstream
assets appears to be a smart move, given the current oil and
natural gas production boom in the U.S.
The prices of oil and gas are however tied to macro and other
political factors, and can be pretty volatile. Any unfavorable
movement in the market price and a decline in the realized prices
will affect the revenue and earnings streams of the company.
In addition, Devon's operations are subject to numerous U.S. and
Canadian rules and regulations. Changes and modification to
public policies can affect the operations of the company. The
compliance with these provisions and adherence to any change in
the policies would increase operating costs and constrain
Other Stocks to Consider
Stocks in the oil and gas sector that are currently performing
SM Energy Company
Matador Resources Company
Bonanza Creek Energy, Inc.
). All these companies carry a Zacks #1 Rank (Strong