Drilling Deep, Cashing Big - Devon Energy's Significant Upside Potential

Leo Nelissen
11-29
  • Devon Energy is undervalued, trading at just 3.5x operating cash flow, with a fair value estimate of $82 per share, offering significant upside potential.
  • Despite recent underperformance, DVN's fundamentals are strong, with record-breaking production and efficiency gains, particularly in the Delaware Basin.
  • The company plans to return up to 70% of free cash flow to shareholders through dividends and buybacks, promising substantial returns at higher oil prices.
  • Devon's stock is volatile and best suited for risk-tolerant investors, while more conservative investors might prefer peers like Diamondback Energy and EOG Resources.

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Introduction

I love the energy sector.

By now, I doubt will come as a surprise to many readers. The main reason for that is its valuation. In a market with a lofty valuation, the energy sector truly stands out. As the chart below shows, energy

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