Pipes carry recovered bitumen from Devon Energy Corp.'s Jackfish Projects processing plant near Conklin, Alberta. Bloomberg file
The stock of Oklahoma City-based Devon Energy Corp. has been having a strong year, and more big gains are possible, some analysts say.
Near the end of August, shares of Devon were trading at about $57, up more than 9 percent for the year.
Bruce DeShazo, a financial adviser and vice president at American Heritage Investments, noted that Nasdaq stock pickers have a 12-month target of $70 for the company and Morningstar is even more optimistic at $87.
"Devon looks good in terms of its financials and its outlook for substantial earnings and consistent growth," said DeShazo, who made the energy company his No. 1 pick for the Investment Guide.
A few weeks ago, Canaccord Genuity analyst Robert Christensen initiated coverage on Devon with a "buy" rating and a $75 price goal.
"We like Devon's organic transition to greater high-margin oil and natural gas liquids production," Christensen wrote in a report to clients.
"Concurrently, the company is pursuing multiple restructuring options to unlock shareholder value. Restructuring proceeds, along with newly repatriated cash, could fund a significant share buyback program and/or a major U.S. acquisition."
Devon already has a history of growing through acquisitions, including a $2.2 billion deal for Chief Holdings in 2006, a $5.3 billion merger with Ocean Energy in 2003 and a $5.3 billion purchase of Mitchell Energy and Development in 2002.
DeShazo said he likes the fact that Devon's operations are balanced between oil and natural gas. The current high price of crude allows the company to benefit, he said, while the low price of natural gas creates opportunities as that market strengthens.
Most of Devon's operations are onshore in the United States and Canada. It also owns natural gas pipelines and treatment facilities in many of its producing areas, making the company one of North America's larger processors of natural gas liquids.
The company's production consists of about two-thirds natural gas and one-third oil and natural gas liquids. Overall, Devon brings to the surface about 2.6 billion cubic feet of natural gas a day, which is more than 3 percent of all the gas consumed in North America.
On the oil side, production averaged 169,000 barrels per day in the second quarter, a 14 percent increase compared to the second quarter of 2012 and a 4 percent increase compared with the previous quarter.
In the second quarter, Devon reported earnings of $683 million, or $1.69 per common share. That compared with $477 million, or $1.18 per share, for the same period a year ago.
Growth in oil production was particularly impressive, with Devon's activities in the Permian Basin and elsewhere in the U.S. driving a 36 percent increase year over year.
"We remain on track to deliver total companywide oil production growth in the high teens for 2013, led by light-oil growth of nearly 40 percent in the U.S.," said John Richels, Devon's president and CEO.
Devon Energy Corp.
Address: 333 W. Sheridan Ave., Oklahoma City, OK, 73102-5015
Telephone: 405-228-4800
Web address: www.devonenergy.com
Chairman: J. Larry Nichols
President, CEO: John Richels
Symbol (Exchange): DVN (NYSE)
Operation: An independent energy company that explores for, develops and produces oil and natural gas; transports energy; and processes natural gas.
John Stancavage 918-581-8314
john.stancavage@tulsaworld.com
Original Print Headline: Big gains still possible
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