BMO Calls Devon Energy 'Top-Tier' In Oil & Gas

BMO Capital Markets analysts rated Devon Energy Corp DVN at Outperform. The analysts increased their price target to $40 from $35.

The brokerage said, "We view its North American asset base as being top-tier among large-cap E&Ps with core positions in the STACK, Delaware Basin, Eagle Ford, and heavy oil development. Balance sheet healing, cost structure right-sizing, efficiency gains, and well productivity improvements position Devon well for the eventual upturn."

The analysts updated their estimations for Devon Energy after the last week's disclosure of $1 billion monetization of non-core upstream properties. They believe the company is on target to achieving its $2-$3 billion monetization target since it has already achieved $1.3 billion.

Related Link: Devon Energy To Sell Non-Core Upstream Assets Worth $1 Billion

The energy firm is in the process of marketing its non-core oil assets in the Midland Basin, as well as the Access pipeline in Canada. The Midland Basin included 25 MBoe/d and 15,000 net acres in Martin Country that the analysts estimate could be worth about $700-$900 million in PDP, as well as $300-$400 million in underdeveloped acreage.

BMO Capital believes the valuation of Access was dependent on agreed-upon tariffs and contract terms. However, they think ~$800 million is reasonable, and would put the company above the high end of its targeted monetization range. These deleveraging transactions and higher commodity prices should help put Devon on a path to stemming sequential production declines in 2017 and resuming growth in 2018.

The stock traded 3.47 percent higher on Monday.