DEVON ENERGY CORP. (New York symbol DVN; www.dvn.com) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 57% gas and 43% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it saw as risky and expensive to develop. The company aimed to focus on its North American projects, which include conventional production, Texas shale oil and Alberta oil sands.
Devon recently narrowed its focus even further by selling some of its Canadian properties to Canadian Natural Resources (symbol CNQ on Toronto) for $2.8 billion.
The company will use the cash to fund last year’s $6-billion purchase of oil-producing properties in Texas’s Eagle Ford shale formation. It also plans to expand its other U.S. operations.
Meanwhile, Devon’s daily production averaged 696,200 barrels of oil equivalent in the three months ended December 31, 2013. That’s up 2.6% from 678,600 barrels a year earlier. Cash flow per share jumped 24.6%, to $3.75 from $3.01, on the increased production and higher oil and gas prices.
The company’s $12.0 billion of debt is 42.9% of its market cap. It ended the year with cash of $6.1 billion, or $14.97 a share.
The company is raising its quarterly dividend by 9.1%, to $0.24 from $0.22, with the June 2014 payment. The stock now yields 1.4%, based on the new rate.
Energy stocks: Higher production and higher prices push up cash flow for Cimarex
CIMAREX ENERGY (New York symbol XEC; www.cimarex.com) produces and explores for oil and gas. Gas makes up 50% of its output.
Cimarex’s properties are in the Mid-Continent region of the U.S., which includes Oklahoma, Kansas and Texas (49% of production); the Permian Basin of western Texas and southeastern New Mexico (47%); and the Texas Gulf Coast (4%).
In the three months ended December 31, 2013, Cimarex’s production averaged 704.9 million cubic feet of natural gas equivalent per day (including oil). That’s up 4.2% from 676.7 million cubic feet a year earlier.
Thanks to the higher production and increased oil and gas prices, Cimarex’s cash flow per share rose 6.8%, to $4.40 from $4.12.
The company’s total debt of $934 million is 9.3% of its market cap. The stock yields 0.5%.
In the latest edition of Stock Pickers Digest, we look at the cash flow projections for both of these stocks in light of the outlook for oil and gas prices and their own rising production. We conclude with our clear buy-hold-sell-advice on these two stocks.
Note: Both Devon and Cimarex released their first-quarter earnings yesterday and we will review the results in an upcoming issue of Stock Pickers Digest.
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