Devon Energy Corp (DVN)

CAPS Rating:

The Company including its subsidiaries, is engaged primarily in oil and gas exploration, development and production, the transportation of oil, gas and NGLs and the processing of natural gas.

View All Commentary (DVN)

Recs

2

Avatar NtscrbEnergy (98.06) Submitted: 3/01/07 8:26 AM : Start Price: $63.94 DVN Score: 40.41

Devon Energy formed with a merger of Devon and Ocean Energy in 2003, is one of the largest independent energy company, primarily engaged in the exploration and production of oil and gas. The company’s major operations of exploration are located in U.S and Canada with properties in Permian Basin, Mid-Continent, and the Rocky Mountains. Its product mix involves over 60% of the natural gas production, while the rest involves crude oil with estimated proven oil reserves of over 2 billion barrels.

Oil and gas prices effect immensely on the performance of players like Davon. A negative fluctuation in the prices can deeply hamper the results. The prices of crude oil continue to remain volatile. In 2006 crude prices hovered around the all time highs, though the above average winter temperatures in U.S., the biggest consumer of crude oil, led to prices falling to 20 month low levels. Looking ahead colder temperatures, announcement of further production cuts by Saudi Arabia and ongoing political concerns in Nigeria will continue to drive the prices to higher levels, benefiting companies like Davon.

Davon financials are looking strong, with revenues and net profit inching upwards, backed by increase in sales of oil and natural gas liquids and rise in marketing and midstream revenues. The trimming of portfolio by selling some potion of the proven oil and gas reserves, is also aiding to bring the debt quotient down. The future of Davon seems attractive as the company is one of the largest stake holders at promising Gulf of Mexico properties and has carried out the first successful production test at the location. Moreover, looking at the short term point of view, the steam-assisted gravity drilling project, Jackfish and projects in Brazil and Azerbaijan, with over 50,000 barrels of oil production per day, are expected to start rolling in second half of 2007, having a likely impact on company’s results. Further, considering the strong industry outlook and growing prices of oil and gas, investing in Devon could prove a right decision.

Report this Post Replies: 1 | Reply | Permalink

Avatar NtscrbEnergy (98.06) Submitted: 6/05/07 5:23 AM

Recs: 1 | Rec This

The independent oil and gas producer Devon Energy recently reported its financials for the first-quarter ended 31 Mar 2007. Revenues of the company observed a 1% drop to $2.47 billion, primarily as a result of reduced gas sales, while drop in marketing and midstream income also was an important catalyst for the top-line decline. However it is the net income from continuing operations that causes major concerns, falling 20% to $572 million. The fall can be attributed to higher lease operating expenses and reduced margins led by higher general & administrative and depreciation & amortization expenses.

The company recently sold off its Egyptian assets to British oil and gas junior Dana Petroleum’s, for $ 375 million. The assets included interests in eight production sharing contracts, with 13 fields currently producing. However this sale can be cited as Devon Energy’s strategy to divest all of its African assets in order to focus on North American growth opportunities and explorations in Brazil and China. For the same company plans to drill seven production wells in the Panyu oilfield in the South China Sea this year, in addition to the 36 wells it currently have in operation.

Though the current financials give indications of a possible slump in the stock price, on the contrary Devon’s stock has witnessed a strong surge, rising over 20% in past three months. The rise is driven by market speculations of company being looked at by Exxon Mobil as a possible takeover candidate, though Exxon has denied such reports. Going ahead, in case of a non acquisition scenario, the continuing rise in oil and gas production comes as a key positive for the company. Moreover, given the constant up-scaling of energy prices, amidst of growing demand and considering widespread reserves base of Devon, it seems a strong investment for the longer term. However, the short term scenario can be marred with rising operating expenses led by higher oil transportation costs and rising industry prices for oilfield services and supplies.

Report this Post Reply

Devon Energy Corp (DVN)

2

Featured Broker Partners

Sponsored Links