We have lowered our recommendation of independent oil & gas
Devon Energy Corporation
) to Underperform from Neutral. The earnings results of the company
were unimpressive in the first half of the year as the company
failed to match our earnings expectation in the first two quarters
DEVON ENERGY (DVN): Free Stock Analysis Report
EOG RES INC (EOG): Free Stock Analysis Report
NOBLE ENERGY (NBL): Free Stock Analysis Report
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In the second quarter of 2012, despite registering year-over-year
growth in production, the performance was impacted by lower
realized prices of the products sold, which resulted in a dip in
total revenue from the prior-year quarter.
Besides, operations of oil and gas companies are subject to various
rules and regulations in the countries of operation. Thus, changes
and modifications to public policies remain as generic threats.
Compliance with provisions and adherence to any change in the
policies would increase operating costs and constrain margins.
Devon's positive catalyst is its deep and diversified portfolio.
The company is presently leveraging its assets to generate funds
required for the development of its operations. For example, after
partnering with Sinopec for $2.2 billion for the development of its
North American assets, the company has entered into an agreement,
worth approximately $1.4 billion, with Japan's Sumitomo Corporation
for the development of the Cline Shale and the Midland-Wolfcamp
Shale in west Texas.
Energy companies are continuously on the lookout for new reserves
to replace depleting resources. Exploration activity does not
necessarily result in commercially viable wells, which increases
the operating cost of the company and Devon is no exception.
Devon Energy currently retains a short-term Zacks #3 Rank (Hold
rating). The company competes with
EOG Resources, Inc.
Noble Energy, Inc.
) among others.
Based in Oklahoma City, Oklahoma Devon Energy Corporation, is an
independent energy company engaged primarily in exploration,
development and production of oil and natural gas. The company's
oil and gas operations are mainly concentrated in the onshore areas
of North America, including the United States and Canada. The
company has 5,200 full time employees and a market cap of $24.73