Devon Energy Corp (DVN)
Signs of A Pulse and Much More; Repatriation Surprise
01 May 2013, 11 pages doc.research-and-analytics.csfb.com
Our take: When a stock is trading at a 52% discount to the peer group on
production (EV per flowing BOE), even a sign of a pulse can be viewed as
positive. In this case, DVN provided much more than vital signs, reporting
solid Q113 results, a tax-efficient structure to bring $2+ billion of offshore
cash back to the U.S., and a timing update on its highly anticipated mid-
stream MLP process. While one quarter doesn’t make a trend, we expect an
improving picture for U.S. gas and WCS realizations to support modest
outperformance from here. Meanwhile, a decision on a midstream MLP
looms in Q213, which could be a near-term catalyst. Reiterate Outperform
with a $75 target price...
...Mississippian getting better, while the Cline looks more speculative. The
company brought on 24 wells, which “continue to support or exceed target
economics.” Several wells produced at 600-1,100 Bopd (a mix of 7 and 30 days). This
compares to the 335 Boe/d 30-day rate for seven wells brought on in Q1. 3D seismic
appears to be working to the company’s benefit. Variability continues to dampen
enthusiasm for the Cline shale. Data from over 30 wells has 30-day rates ranging from
50-800 Boepd. The company is in the process of acquiring 3D, which it will incorporate
into its program later in the year. Additionally, DVN will begin drilling a five well pad in
Sterling County this quarter and intends to test the Wolfcamp to the east as well... |
