Devon Energy's Prospects Seem Bright On Strong Shareholder Return & Balance Sheet, Says Analyst

Raymond James analyst John Freeman reiterated a Strong Buy rating on the shares of Devon Energy Corp DVN and raised the price target from $83 to $87.
The analyst said Devon Energy was the biggest underperformer in his coverage after Q3 earnings.
The pullback creates opportunity as the company still maintains a strong shareholder return, pristine balance sheet, and long inventory life.
He noted that the actual Q3 results beat across the board with a nice combo of higher production and lower capex.
Freeman said the same cannot go true for the Q4 guidance, which was disappointing relative to Street expectations.
The analyst continues to assume Devon will easily exceed the 50% payout ratio by leveraging buybacks to sweeten its solid return strategy.
After the 50% payout, Devon will have substantial cash to flex into buybacks, with additional M&A unlikely in the near-term after the active 2022 campaign on that front.
Freeman thinks Delaware accounts for 60% of Devon’s capital investment and has seen production grow 11% year-to-date.
The company has taken steps to improve price realizations, which was evident in Q3, said the analyst.
Devon’s 20% interest in Pin Oak’s export terminal in Corpus gives them access to 90 Mbbl/d of Brent linked pricing.
Freeman mentioned that Devon’s LNG export partnership with Delfin provides direct exposure to international gas pricing.
Price Action: DVN shares are trading higher by 0.34% at $72.05 on the last check Monday.