On January 10, 2013, we upgraded our recommendation on the
independent energy company,
Devon Energy Corporation
), to Neutral from Underperform.
CABOT OIL & GAS (COG): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis
SANCHEZ ENERGY (SN): Free Stock Analysis
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Why the Upgrade?
In third-quarter 2012, Devon's earnings per share were ahead of
the Zacks Consensus Estimate, aided by lower marketing and
midstream operating expenses and a decline in tax charges.
Devon has exhibited capital discipline by rationally allocating
its resources to projects that are vital for its future growth.
Currently, the company focuses on its oil and liquids-rich
opportunities, and majority of its drilling programs are centered
around oil-focused properties. Devon has also teamed up with
international companies like Japan's Sumitomo Corporation and
China's Sinopec to expand its portfolio, which will subsequently
increase its production capabilities and improve financial
results going forward.
We appreciate Devon's steady liquidity position as well as
operational efficiencies. This reflects its cash balance of $5.3
billion as of September 30, 2012 and third-quarter 2012 cash flow
from operating activities of $3.8 billion. This financial
stability enables the company to follow steady expansion
In addition, Devon intends to merge its U.S. personnel into a
single operations group and expects to complete this process by
first-quarter 2013. Post consolidation, we expect overall
operational productivity, which in turn, will improve employee
synergy and minimize operating costs.
However, we are primarily skeptical about volatility in commodity
prices, which might partially mitigate the existing positives.
Devon Energy Corporation currently has a short-term Zacks Rank #3
Other Stocks to Consider
Besides Devon Energy Corporation, other stocks in the energy
sector that are currently performing well include
Cabot Oil and Gas Corporation
Sanchez Energy Corporation
). Both Cabot Oil and Gas, and Sanchez Energy currently carry a
short-term Zacks Rank #1 (Strong Buy).
Oklahoma City-based Devon Energy Corporation engages primarily in
exploration, development and production of oil and natural gas.
With a market capitalization of $21.82 billion, the company has
5,200 full time employees.