By Devon Energy (NYSE: DVN) Best stock while Crude oil is hot: This TabStocks article takes an IN-DETPH look at Devon Energy
Stock ticker
DVN ($DVN)
Stock Name and Trading Stock Exchange Platform
Devon Energy Corp – NYSE (NYSE: DVN)
The Stock Sector
Devon Energy is a hydrocarbon exploration, Development, and Production of oil. It is a Fortune 500 company that focuses on onshore operations, mainly in the United States.
It is one of the leading independent oil producers. It operates in Delaware, one of the most oil-rich regions in the US.
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It is also active in the Permian Basin, Eagle Ford, Rockies oil, and many others.
It was founded in 1971 by the Nichols father-son duo and is headquartered in Oklahoma City.
Recent Most Important News in Devon Energy (NYSE: DVN)
Devon has been part of the oil boom and has grown quite robustly amid the bull market.
It has become the benchmark for the oil markets due to its astounding correlation with the Brent Crude index.
Black gold has regained its position as King and this has been evidenced by the record profits raked in by Petroleum companies.
Cash flow has been plenty huge for the companies and Devon proved this by its recent acquisition of the Eagle Ford Shale in Texas, renowned for its abundance of hydrocarbons.
The Company posted impressive results in its quarterly earnings at the start of August. This helped in financing the $1.8B buyout of Valence Energy.
The merry tales continued as Devon announced a big dividend program for common stockholders, issuing a record $1.55 per share, up by +22% from the last quarter.
Oil has seen modest retracement in the past week as worries of an economic slowdown increase. Russia has also increased its output which also contributed to the drop.
The slight downturn sent related stocks tumbling, asserting the volatile nature of the oil markets. Devon was affected for a day but then came flying back up.
The situation in Eastern Europe is responsible for the dramatic price action experienced.
Europe’s preference for oil over natural gas has seen the latter inch higher. Devon has an equal interest in both oil and gas, therefore it’s well hedged to benefit.
The outlook for the energy sector remains positive with oil futures climbing higher. The sector is undisputedly the best performing in the year.
Devon’s recent acquisition marks the second one this year, priory purchasing RimRock for $865M.
Questions arise about whether the momentum will be sustained with the worrying economy.
Current Position of Devon Energy (NYSE: DVN)
Devon is one of the most scrutinized stocks by analysts. The entry of Warren Buffet into the Oil markets has sparked interest, considering he dumped the sector two years earlier when oil turned negative due to the pandemic’s effects.
Devon is among the few that are still up this year. It has recorded triple digits increases in most of its figures.
The company is strategic to capitalize on the Oil boom and its acquisitions will accelerate this initiative. Boosted earnings growth is expected from its new subsidiary, Validus energy.
Speaking to CNBC last week, Devon CEO Rick Moncrief is confident that they will maintain the upward trajectory.
He particularly emphasized their stellar return to investors and a scheduled repurchase program estimated at $2B.
The company is outstanding, especially in these uncertain times. Inflation is still soaring and a higher income is the way to tackle price hikes.
Dividend investors understand this and place their bets only on essential high-paying companies.
Despite the oil industry being mired, it is still very necessary in our existence. The oil shortage has shed light on this and has served as a wake-up call.
The green new deal has been halted and even formerly conservative countries are going back to exploiting hydrocarbons.
The transition is very difficult nay impossible at the moment with the crisis.
Devon estimates that it still has more than 10 years of high producing oil capacity. It is still ardently exploring new reserves.
The world has an estimated 50 years of hydrocarbon production before depletion, with only the current discovered wells.
As the economy takes a downturn, only the most essential services like energy survive. Devon is focused on returning to its investors despite the global headwinds.
The company has set an industry standard as one of the best returns for investors. Paying out as much as half of their free cash flow as dividends, has affirmed this position.
It has implemented policies to be more efficient in its operations which culminate in better margins. It also has a hedging strategy of about 20% of its total production.
Compared to its peers it has been more resilient and has held better than the crude oil price.
The record high prices of oil in June led to a massive sell-off as investors seek to reap profits before the trend reverses.
Devon is the new secular growth opportunity, considering its rapid expansion. Investors are in it for the long haul as they are attracted by long-term dividends as opposed to capital gain on the stock price.
Seeking Alpha has ranked Devon as the #1Dividend stock to own. The Oil sell-off is a blessing in disguise to contrarian investors who can buy them cheap.
Saudi Aramco, the world’s largest company posted the biggest quarterly earnings of any public company.
Devon and others have followed suit and are more likely to scale upwards than the Saudi Oil giant.
Devon is in a great position with huge upsides, it’s a contrarian play in the market chaos.
Devon Energy (NYSE: DVN) Stock Price Chart
Devon Energy (NYSE: DVN) stock price chart
As of the 18th of August 2022, the stock is trading at $64.14. It came off its highs in June when Oil was at its highest in the year.
The stock has seen a 52-week high of $79 and a 52-week low of $24. It still has significant rallying momentum, which has been seen in the past month.
It is up by +3.79% in the past week and +17.43% in the past month. $DVN is equally up 175 in the past 6 months and a stunning 145% in the past year.
The share price is justified given the amazing performance of the company, making it very appealing to shareholders. It is up by 290% since the beginning of 2021.
It has a good P/E ratio of 8.13, indicating a relatively sound value of the stock.
Sentiment on Devon Energy (NYSE: DVN)
Experts in the oil markets foresee continued growth in the coming months. The quality earnings posted have been appraised and are truly unmatched.
The slight plunge is an excellent chance to make an entry. The EIA (Environmental Impact Assessment) report has been released and is in favor of Crude and gasoline.
Schork Group founder Stephen Schork talked to yahoo Finance saying,
We’re in a long-term structural bull market in oil,
he said.
by the end of the year, I would suspect that these prices will be back in that $100 to $125 range, which we’ve seen through the first half of the year.
Some hold the notion that the profitability of the company is not tied to the price but rather to monthly and quarterly averages.
The supply imbalance is way distorted and the current production levels still fall shy of pre-pandemic levels.
Winter is fast approaching in Europe and there need for heat from natural gas to keep warm. The sun never sets on fossil fuels and Devon operations are a testament to this.
Pros for Investing in Devon Energy (NYSE: DVN) based on Investors Outlook
- Huge Dividends – The company is one of the most generous dividend stocks in the sector and has not held back in giving back to investors. Devon is a cash-flowing investment that rewards investors irrespective of stock gains, which are also on the rise.
- Attractive Price – It is lowly priced compared to its peers of similar size. This is also notwithstanding the remarkable dividend payout.
- Safe jurisdiction – It mainly operates in the US, which means it is free from Political instability and can leverage the best technology for faster and more efficient production.
- Top-Tier Financials – The company runs a clean balance sheet with sane operating ratios. Its earnings have shot up with manageable debt.
Cons for Investing in Devon Energy (NYSE: DVN) based on Investors Outlook
- Environmental risks – Oil spills occur especially during periods of robust growth as production is speeded up. A single environmental issue could spell disaster for the company.
- Recessionary risks – If an enormous downturn occurs, the sector will likely take a hit. The pandemic served as a precursor, showing poor oil performance. in an economic crisis.
Profits for Devon Energy (NYSE: DVN)
A profit windfall was officially granted to oil companies and Devon has not been left behind. It has recorded an astronomical rise in its earnings.
Revenue for the quarter in June 2022, was recorded at $5.58B, up by +78% in the past year. Its operating expenses decreased in the quarter by -32%, valued at $821M.
The net income was up by a staggering +654%, coming in at $1.93B. The net profit margin for the quarter increased by +321%, recorded at 34.61%.
EPS for the quarter was at $2.59, up by +331%. EBITDA was estimated at $3.10B, up by 261% YOY.
Devon is remarkably profitable and they should maintain this with the current price of crude oil.
Although a major price decline would be dangerous, the demand still exceeds supply and this should keep the price up in the near term.
It issued a dividend of 6.86% to its investors, comprising about $600M in cash. Its free cash flow for the quarter was about $1.23B, up by 106% over the year.
Profits are looking up for the company and they have utilized the free cash flow for share buybacks, erasing more than 4% of its outstanding stock.
The balance sheet is top-notch, with their cash and short-term investments increasing by +144, valued at $3.30B.
Devon has been a great return both in the long and short-term. It has an incredible +38.69% return on invested capital.
Pros of Investing in Devon Energy (NYSE: DVN) based on the General Outlook
- Superb Track record – The company is well established with a 50-year history of operations. It ranks well in climate observance and follows ESG values. It aims to achieve a Net zero by 203
- Superior execution – Devon has heavily invested in improving its infrastructure and gearing itself with the latest technological advancements.
- Excellent management – It has visionary leaders who have set the standards in the industry. Their priority is returning to investors and they have gone to great lengths to accomplish this.
- Sizeable Portfolio – The company has many strategic oil assets and leases. Through its many acquisitions, it has been able to secure a solid position in mass production. Its merger last year with WPX saw it take off.
Cons of Investing in Devon Energy (NYSE: DVN) based on the General Outlook
- Oil fluctuation – Oil prices are never static and a single event could cause them to plummet. It has already fallen from $120 and is hovering around $85-$90.
- Increased competition – The industry is very competitive and investors have their eyes elsewhere. Warren Buffet’s bet on Occidental Petroleum should be an interesting one that will capture the market’s attention, although it does not return as much.
Growth Likelihood and Potential for Devon Energy (NYSE: DVN)
The oil industry still faces a shortfall and the rush to meet demand ensues. Devon has an excellent balance sheet and returns that are incomparable.
The company is in Houston, the hotbed of energy, and will be instrumental in solving shortages in the US.
It has a fairly large market cap of $44B, but with growth like this, it could go on to become one of the Supermajors.
Overall Verdict on Devon Energy (NYSE: DVN)
All market forces are ripe for Devon to yield fantastic returns in the long term. Analysts rank it as a strong buy owing to its aggressive expansion campaigns.
The technicals indicate that the stock is a strong buy, with moving averages showing a strong buy as well as Oscillators.
Devon is positioned to do well no matter the state of the markets. Crude oil still runs the world and its exploration efforts will serve it well.
Due diligence is advised for those aiming for capital gains as volatility is a risk. Cash flow investors will find it pleasant no matter the price of the stock.
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