No. of Recommendations: 5
The oil and gas extraction sector has been out of favor for a long time. Even a “drill baby drill” president hasn’t helped.
Devon Energy is generating strong free cash flow from operational improvements, which are reducing capital expenses. They are paying down debt and repurchased 1.25% of shares outstanding in Q2. They have a variable dividend policy, which many dividend investors do not like, but allows them to spend more on buybacks when share price is low, like now trading at a forward PE of 8.
Following is a Perplexity summary of Devon’s Q2 earnings from call:
The company generated strong free cash flow of $589 million for the quarter.
• Capital spending was 7% below expectations, reflecting disciplined capital allocation and efficiency gains.
• Devon reduced 2025 capital guidance by $400 million while simultaneously raising production forecasts, improving free cash flow outlook.
• Operational improvements and AI-driven efficiencies contributed to about 12% drilling cost and 15% completion cost reductions.
• Strategic midstream investments include acquiring Cotton Draw Midstream and securing long-term gas sales agreements projected to save $50 million annually.
• The company repurchased $249 million shares during the quarter and declared a quarterly cash dividend of $0.24 per share.
https://seekingalpha.com/article/4812553-devon-ene... 