Devon Energy CorporationDVN

Morningstar Rating

Stock Research and Analysis

by Justin Perucki, CFA

After trimming its portfolio in 2005 and announcing in the summer of 2009 that it is seeking a partner for up to half of its deep-water interests, Devon has decided to pare even further by selling all of its non-Canadian international operations and its stakes in the deep-water Gulf of Mexico. Read more

Bulls Say

Devon's sizable reserves in Texas' Barnett Shale give the company a relatively cheap and long-lasting source of natural gas within easy reach of major North American gas markets.

Legacy positions in east Texas and north Louisiana provide the company with a significant amount of acreage with Haynesville Shale prospects.

Devon's restructuring reduces geological risk but increases price risk.

Like other producers, Devon is driving down costs through the help of improved drilling efficiency and a sufficient supply of oil field services. Read more

Bears Say

Devon is planning to increase natural gas production during 2010 despite a fragile North American natural gas price market.

Proposed changes to the tax code, if enacted, could reduce Devon's operating cash flow more than 20%, all else equal. Read more

Strategy

Devon is shaking up its strategy. The firm is selling the remainder of its international operations and all of its Gulf of Mexico operations. Devon will now be entirely focused on North American onshore production, namely, natural gas shale plays and the Jackfish oil sands project. Read more

Management

CEO and chairman J. Larry Nichols and his father co-founded Devon in 1971. Nichols has presided over the company's growth from a small, regional firm into America's largest independent exploration and production company. We were happy to see that the majority of Nichols' compensation is variable. Read more

Profile

Devon Energy as we know it today was formed in 2003 from the merger of Devon and Ocean Energy. It is now one of the largest independent exploration and production companies based in the United States. Read more

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