Following the sale of billions of dollars worth of international and offshore assets, the Wall Street crowd is undervaluing Devon Energy, one of the largest U.S.-based independent oil and gas producers, according to the most recent issue of Barron's, the financial news magazine.
Oklahoma-based Devon (DVN) initiated a program to sell its global and offshore assets prior to the Gulf of Mexico oil spill as part of plan to focus more on oil and natural gas production in the U.S. and the Canadian oil sands. Sales of $8 billion in assets last year have left Devon with proved reserves of about 2.6 billion barrels of oil-equivalent, including more than 700 million barrels of Canadian reserves, according to Barron's.
While shares of Devon have doubled since the March 2009 lows, they are still reasonably valued at 14 times 2011's expected profits and 11 times 2012 profits, Barron's notes. Analysts are expecting Devon to earn $6 a share this year and $7.92 a share next year.
Devon is heavily exposed to natural gas and with futures languishing around $4 per million British thermal units, that may be keeping some investors at bay regarding Devon, Barron's reported. The company has pledged to step its oil production and is currently in the midst of a $3.5 billion share repurchase plan. Devon reports fourth-quarter earnings on Wednesday.