New Energy Play

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ITZ is suggesting  Devon Energy Corporation, together with its subsidiaries, engages in the acquisition, exploration, development, and production of natural gas and oil in the United States and Canada.Devon reports Q4 earnings on February 15th, ITZ is looking for EPS of $6.00 in 2011 and $6.60 in 2012,

DVN had repurchased $3.4 billion shares as part of a $3.5 billion program it expects to complete this year. In July, DVN raised capex plans by $1 billion to $5.5-$5.9 billion in 2011, within cash flows.DVN is currently trading at 5.6 times the trailing twelve-month earnings per share, a price to earnings ratio that is, however, 55.53% below the average of the Oil, Gas & Consumable Fuels industry.

With a net margin of 49.8%, DVN is able to keep a higher percentage of its revenues than most other companies in the Oil, Gas & Consumable Fuels industry. Furthermore, as measured by a cash flow margin of 43.7%, the company is doing an average job at converting sales into cash compared with others in its industry.

DVN uses little or no debt in its capital structure and may have less financial risk than the industry aggregate. Cash collection is worsening, with 40.8 days worth of sales outstanding. Finally, this company holds approximately 24.6 days of inventory on its books.

 

DVN has sold $10 billion of assets in deepwater GOM (Gulf of Mexico), the GOM shelf, Brazil, and Azerbaijan, and sees after-tax proceeds of about $8 billion to fund onshore drilling, buy back shares, reduce debt and fund acreage acquisitions. It is running about 70 rigs, 59 in the U.S. and 11 in Canada.

Enter around $64. SET STOP $62...Price Objective $70

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