Devon Energy is Ripe

Devon Energy (NYSE: DVN) is refocusing itself. Non-core holdings are being shed, and the proceeds are being used to accelerate growth of the company’s premier North American assets.

Devon grew up as a company in the natural gas shale plays of the Midwest. Through superior technology, a focus on cost discipline, and a consistent track record, Devon has become one of the largest independent exploration and production companies in the United States. Couple their holdings with the resurgence of tertiary domestic recovery and strong leasehold position and you have a strong steady well that should pay royalties for next 2-5 years.

As the firm has grown, so too has its asset base – encompassing emerging natural gas fields all over the world.

In an all too often rare move, Devon’s management has realized that the company currently has an overabundance of opportunities. To better position itself, Devon has decided to compete where it is most competitive – North America. As a result, all of the firm’s international and Gulf of Mexico production fields will be sold.

As Devon narrows its focus to North America, the fundamentals of the firm continue to improve. Over the last three years, Devon has been able to grow North American production at 9% per year, while international production has stagnated. Read more Devon stock news and recent announcements.

Besides allowing Devon to refocus on its most profitable fields, the asset sales are expected to raise $4.5 – $7.5 billion in cash.

With these funds, management plans to take the very positive approach of: 1) paying down debt to strengthen the company’s already healthy balance sheet and 2) ramping-up production to further leverage the growth potential of the firm’s existing domestic acreage.

As the fundamental prospects for Devon continue to improve, its valuation remains attractive. In fact, compared to what Exxon Mobil recently agreed to pay for XTO Energy (one of Devon’s main competitors), this stock looks downright cheap.

With a more focused outlook, a strengthening balance sheet, and great valuation, we continue to view Devon as an untapped opportunity with years of growth ahead.

Look for Devon to be a boomer over the next couple weeks, months and a solid buy hold investment.    Current open position and strong buy status on DVN. Currently trading around $66 and showing strong uptrend. Look for Devon stock price to bust out +75 in next 2-3 monhts.

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