Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

3 Risks to Watch at Devon Energy Corporation (DVN)

Page 1 of 2

I recently covered five reasons to love Devon Energy Corporation (NYSE:DVN) . As much as there is to love about this company, all investments have risks that need to be monitored. Here are three areas that Devon investors might want to watch.

It’s still a bit gassy
While Devon does have a fairly well balanced production mix, that production does tilt toward natural gas. In fact the company produces more than 2 billion cubic feet of natural gas each day, which is more than 3% of all the gas consumed in North America. That’s enough to rank the company fourth behind Exxon Mobil Corporation (NYSE:XOM), Chesapeake Energy Corporation (NYSE:CHK), and Anadarko Petroleum Corporation (NYSE:APC) . In total, about 60% of the company’s production is natural gas.

Devon Energy Corp (NYSE:DVN)Both ExxonMobil and Anadarko produce more liquids and respectively rank second and sixth domestically in terms of average daily liquids volume. In addition to that, both companies have operations that span the globe and operate both onshore and offshore. That diversification has helped both produce much more stable returns. Devon’s operations, like Chesapeake’s, are 100% onshore, though Devon has international presence thanks to its Canadian operations and a much stronger balance sheet.

To be fair, Devon’s oil production was up 20% last year and its not investing any capital to grow its natural gas business. Instead, its allowing its gas production to decline and filling in that production with oil and natural gas liquids. However, some of that production is in another commodity selling at a discount.

The current commodity conundrum
You see, Devon also produces Canadian crude out of the oil sands. The problem is that the commodity, thanks to pipeline and refining constraints is cheap. That crimps its profits just like North American natural gas.

Now, there is hope on the horizon as new pipelines are coming online and rail is beginning to pick up the slack. However, in the near term, Canadian crude is priced at a big discount to U.S. benchmark West Texas Intermediate crude oil. Having not one but two unloved commodities has hurt Devon’s stock price and made it dirt cheap.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!