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Devon to Sell Non-Core Assets of Delaware Basin to Carrizo

Devon Energy Corporation DVN announced that it has entered into a definitive agreement to monetize its 9,600 net acres of non-core Delaware Basin acreage in Ward and Reeves County. The company sells the non-core asset to Carrizo Oil and Gas, Inc. CRZO for $215 million. The deal was announced on Aug 14, 2018.

The company monetized nearly $4.4 billion worth of assets year to date. The company’s divestiture target is set to reach $5 billion in 2018. Further, the company expects to sell-off additional minor non-core assets such as oil recovery projects in the Midland Basin and Rockies along with Wise County acreage in the Barnett Shale by this year-end. Last month, the company completed the sale of its ownership interests in EnLink Midstream Partners, LP ENLK and EnLink Midstream, LLC ENLC for $3.125 billion to affiliates of Global Infrastructure Partners.

Vision 2020

Devon continues to work on its Vision 2020 plan. To this end, the company is introducing an advanced technology to produce high volumes from oil wells. This comes as part of its agenda with cost-saving initiatives and the ways to generate peer-leading returns from its invested capital to the shareholders.

Shareholders’ Gain

The initiatives undertaken by the company promise to generate a cumulative free cash flow of $2.5 billion through 2020. Also, costs will be lowered by 15% through 2020 from the 2017 levels. Devon will utilize these funds not only to expand its existing operations but also to increase its shareholders’ worth as well as lower outstanding debts.

Devon’s board of directors authorized a $3-billion increase in Devon’s previously announced $1 billion share-repurchase program. With this raise, the total buyback program is presently valued at $4 billion. The $3-billion rise in authorization extends through Dec 31, 2019. At the end of July, Devon bought back 24 million shares or 5% of its outstanding shares for a total cost of $1 billion, which will surely leave a positive impact on earnings per share in the upcoming quarters. Recently, the company hiked its quarterly dividend rate by 33%.

Devon has plans to retire $1 billion of debt for strengthening its balance sheet and reducing interest expenses.

U.S. Oil Production to Drive Devon

Devon Energy’s focus on its resource-rich Delaware and STACK assets, forming the backbone of its U.S.-based production, is likely to boost its performance. Devon maintains its 2018 oil production growth to be around 16% from the 2017 level. Given the ongoing upswing in oil prices, the company’s prospects are definitely going to get an added stimulus.

Price Movement

Devon Energy has returned 35.1% in the past 12 months, outperforming its industry’s rally of 14.4%.

Zacks Rank

Devon currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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