DVN - Devon Energy: Consolidation Creates Buying Opportunity (Rating Upgrade)

2024-07-07 23:02:26 ET

Summary

• Devon Energy's shares are consolidating despite rising petroleum prices due to OPEC+ production cuts. Production curbs should lead to improved earnings and free cash flow prospects.
• OPEC+'s decision to extend supply cuts has positively impacted petroleum prices.
• Free cash flow upside translates into stronger capital return potential.
• Devon Energy is undervalued at a P/E ratio of 8.2X and has revaluation upside.

Shares of Devon Energy ( DVN ) started to consolidate in April, although petroleum prices have seen new upward momentum after OPEC+, led by Saudi Arabia and Russia, decided to curb supplies in a bid to support energy markets. As a result, Devon Energy faces improved earnings and free cash flow prospects. In an improving pricing environment, Devon Energy also has the potential to accelerate its capital returns and return more cash to shareholders in the coming quarters. With shares trading at 8.2X forward earnings, Devon Energy is undervalued and has an improved risk profile....

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