DEVON ENERGY CORP/DE (DVN): what the price assumes

In the published model solve dated 2026-Q2, anchored at $47.48, DEVON ENERGY CORP/DE (DVN) is priced for +4.6% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/DVN

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 9.8% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

The price is supported by asset-based and earnings-power and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.2%); the inversion above states its own rate.

Per-Model Detail (n=13)

Economic-Unit Decomposition (Sum Of The Parts)

Only one reportable economic unit is present in the current topology source. Consolidated operating lenses remain available, but there is no multi-unit decomposition.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.

Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.

Bullet Takeaways

• One basin carries the reserve base: of the reserves Devon added through extensions and discoveries last year, 212 MMBoe came from the Delaware Basin, against 33 MMBoe in the Anadarko Basin and 32 MMBoe in Eagle Ford.
• Profit here is set by a market the company does not control, and the 10-K opens its strategy discussion by conceding exactly that: "our cash flow is highly dependent on volatile and uncertain commodity prices".
• Second-quarter results are due August 4, and press reporting has the company weighing a sale of its Eagle Ford and Powder River positions.

Bull Case

An oil producer's income statement describes last year's commodity prices at least as much as it describes the business. What is actually being bought is drillable inventory plus the machinery to convert it into cash faster than the wells already producing run down. That race between depletion and replacement is invisible in an earnings multiple. It is visible in the reserve tables, and Devon's reserve tables are concentrated.

Of the reserves added through extensions and discoveries in the latest year, 212 MMBoe sat in the Delaware Basin, with 33 MMBoe in the Anadarko Basin, 32 MMBoe in Eagle Ford, 26 MMBoe in the Powder River Basin and 19 MMBoe in the Williston. The 10-K attributes those additions to "Devon's drilling and development activities in the Delaware Basin, followed by the Rockies ( 23 %), Eagle Ford ( 12 %), and the Anadarko Basin ( 8 %)". Alongside them, 175 MMBoe converted from proved undeveloped to proved developed, which is the unglamorous part of the business working: acreage that was a spreadsheet entry became wells with pipe in the ground.

The balance sheet is built to let that continue through a bad year. The Q1 2026 filing puts 7.4 billion dollars of debentures and notes on fixed rates averaging 5.7%, alongside a 1.0 billion dollar term loan whose variable rate stood at 5.2% on March 31, 2026. Against that, roughly 1.8 billion dollars was held in cash at the end of the quarter, and the covenant test came in with a debt-to-capitalization ratio of 24.9%. At the close of 2025 the revolving facility was untouched: "Devon had no outstanding borrowings under the Senior Credit Facility and had less than $ 1.0 million in outstanding letters of credit under this facility". A producer with an undrawn revolver and cheap fixed-rate paper does not have to sell assets into a weak strip.

Capital return runs off a formula rather than a promise. The company describes "a general target of paying out approximately 10% of operating cash flow through the fixed dividend", with variable dividends and buybacks layered on top when cash allows. In February 2026 the board declared 24 cents a share for the first quarter. Tying the fixed payment to cash generation rather than to an announced growth rate is what lets a cyclical business pay through the cycle instead of borrowing to look consistent.

The methods used to triangulate this company land in an unusual place for a stock at this multiple. The asset-value approaches and the cash-flow approaches both reach today's price rather than falling short of it, and the most conservative construction in the whole set, Graham's floor built from book value per share of 24.96 dollars and 3.59 dollars of trailing earnings, reaches 44.91 dollars a share. That is within pennies of where the shares trade. When the deliberately austere method and the market agree, the argument for the bull is not that a re-rating is owed; it is that very little optimism has been paid for.

Bear Case

Producers earn what the strip pays them, and the trailing profit any of them reports is a statement about the last twelve months of oil and gas prices rather than a description of normal. That is the first thing to hold in mind here. The second is that the industry has a built-in governor working against its own good years: the 10-K notes that the costs of rigs, materials and oilfield services "will generally increase during periods of higher commodity prices" and can be worsened by inflation and supply chain pressure. Margin expansion in a strong market is therefore partly leased, not owned.

That matters because of what today's price asks for. The shares change hands at roughly 12 times company-wide operating profit, which works backward to something like 4.4% a year of operating-profit growth sustained for five years. Ask where that growth comes from and the company's own strategy statement answers uncomfortably: the Q1 2026 filing describes priorities of "moderating production growth, emphasizing capital and operational efficiencies, optimizing reinvestment rates to maximize free cash flow". Volume growth is explicitly not the plan. So the required improvement has to arrive through realized prices or through cost, and only the second of those is management's to decide.

The requirement is also unusually sensitive to what a buyer demands as a return. Raise the required return by a single percentage point and the growth the price implies moves by more than five points. A bet that swings that far on a modest change in assumed discount rate is not a precise claim about the business; it is a claim about the rate environment wearing an operating disguise.

Well results supply the concrete version of the risk. Devon recorded downward reserve revisions in the Williston Basin of 19 MMBoe "due to reduced well performance compared to previous estimates", offsetting modest upward revisions elsewhere. Shale inventory is not uniform, and the difference between a good bench and a mediocre one shows up years after the acreage is bought. The price swings on top of that are large: CHRD disclosed a realized natural gas price in the Williston of 3.15 dollars per thousand cubic feet in 2025 against 1.78 dollars the prior year, a move driven by the market rather than by anything either operator did.

Concentration completes the picture. The Delaware Basin supplies most of the reserve growth, which is a strength in a good rock cycle and a single point of exposure in a bad one, whether the shock is geological, regulatory or takeaway-related. On the customer side, the filing's reassurance is telling in its own way: if several large buyers stopped purchasing abruptly, the company "believes it would have the resources needed to access alternative customers". The balance sheet, in fairness, is not the fragile part of this story, and at a quarter of capitalization the debt load is not what would force management's hand. Producers rarely fail on leverage. They disappoint on price.

Valuation

Today's price works out to roughly 12 times company-wide operating profit. Run that backward and it embeds about 4.4% a year of operating-profit growth for five years, discounted around 10% with 4% growth assumed to persist beyond it. For a cyclical producer that is not a demanding rate; it sits inside what the business has recently delivered. The stretch is in duration, not in pace.

The methods disagree in a direction worth noticing. Asset-value approaches and the cash-flow approaches both reach today's price. The earnings-power methods sit under it, with the price about 17% above where that family lands, and the peer-multiple family is furthest away, the price sitting roughly 35% above it. Nothing in that spread describes a growth bet. It describes a name supported by what it owns and what it currently earns, priced above what a static sector multiple would pay for those earnings.

Two individual constructions carry the point. The cash-flow method that reaches the price does so by assuming the multiple a buyer pays for the cash flow in year five is the same one buyers pay today, which is an assumption about market conditions rather than about Devon. The severest method in the set moves in the opposite direction: Graham's conservative floor, built from book value per share of 24.96 dollars and 3.59 dollars of trailing earnings, arrives essentially where the shares trade. When the intentionally pessimistic construction meets the tape, the interesting question stops being whether the stock is cheap and becomes what commodity price the earnings behind it assume.

Cohort comparison here is coarser than it looks, because realizations differ enormously by where the barrels come out of the ground. OVV reported total production of 614.5 MBOE/d in 2025 against 585.0 the year before, but its USA operations realized 39.54 dollars a barrel of oil equivalent while its Canadian operations realized 23.73 dollars. One company, one year, and a gap between its own two regions wider than the gap between most producers' headline multiples. Cohort medians compress that dispersion into a single number, which is why the peer-multiple read should be treated as the crudest of the four rather than the most authoritative.

Solvency bounds the downside rather than adding to the value. The Q1 2026 filing shows 7.4 billion dollars of fixed-rate debentures and notes averaging 5.7%, a 1.0 billion dollar term loan at 5.2%, roughly 1.8 billion dollars held in cash, an undrawn revolver as of the last annual report, and a debt-to-capitalization ratio of 24.9% against a covenant the company was comfortably inside. Cheap, long, fixed-rate debt against a hard asset base is the configuration that lets a producer wait out a bad two years rather than transact in the middle of one.

Catalysts

The next scheduled information event is second-quarter results on August 4, 2026, after the close. Two things will be read closely in that print: the realized price line, which does most of the work in a producer's quarter, and how the board handles capital return now that the repurchase authorization described in the FY2025 annual report has passed its stated June 30, 2026 expiration date.

Portfolio reshaping is the live corporate story. Press reporting in July 2026 described the company as exploring a sale of its Eagle Ford and Powder River positions, with a figure above 4 billion dollars attached to the combined package. Nothing has been filed, and reported deliberations are not deals. It is worth noting only because those two areas are the ones the reserve disclosures show as secondary to the Delaware Basin, so a sale would sharpen a concentration that is already pronounced. The Eagle Ford footprint has already been rearranged once recently: the company and BPX Energy dissolved their partnership on April 1, 2025 and divided the Blackhawk acreage in DeWitt County, Texas.

Sell-side opinion is unusually split in the run-up. Susquehanna raised its target on July 21 and UBS lowered its own on July 17, which is what happens when the variable driving the model is a commodity price nobody at either firm can forecast. Beyond the print, the operational item to track is the stated ambition of capturing 1.0 billion dollars in sustainable annual synergies following the Grayson Mill transaction, which the company reiterated in its Q1 2026 filing.

Peer Cohorts (Per Segment, With Filing Citations)

U.S. Oil & Gas (single reportable segment) (reported)

• OVV (Ovintiv Inc.)
• FY2025 10-K: 862 1,698 2.36 1.70 Total Production (MBOE/d, $/BOE) USA Operations 315.3 344.4 39.54 44.39 Canadian Operations 299.2 240.6 23.73 19.67 Total 614.5 585.0 31.85 34.22 Production Mix (%) Oil & Plant Condensate 34 36 NGLs - Other 16 16 Total Oil & NGLs 50 52 Natural Gas 50 48 Production Change - Year Over Year (%) (3)…
• FY2025 10-K: ( 2,566 ) ( 3,404 ) ( 12,597 ) Revisions to quantity estimates 811 ( 925 ) ( 5,393 ) Accretion of discount 1,540 1,835 3,384 Development costs incurred during the year 2,170 2,291 2,759 Changes in estimated future development costs 692 ( 460 ) ( 1,504 ) Other ( 1 ) ( 1 ) 1 Net change in income taxes 310 537 4,070…
• OXY (OCCIDENTAL PETROLEUM CORPORATION)
• FY2025 10-K: …In addition, discussions of oil and gas production or volumes, in general, refer to sales volumes unless the context requires or it is indicated otherwise. Prices for oil, NGL and natural gas fluctuate widely. Historically, the markets for oil, NGL and natural gas and refined products have been volatile and may…
• FY2025 10-K: …of contents FINANCIAL STATEMENTS Consolidated Statements of Operations Occidental Petroleum Corporation and Subsidiaries Years Ended December 31, millions except per-share amounts 2025 2024 2023 REVENUES AND OTHER INCOME Net sales $ 21,593 $ 22,019 $ 23,156 Interest, dividends and other income 219 192 153 Gains…
• EOG (EOG RESOURCES, INC.)
• FY2025 10-K: …gas and purity products from its producing operations under a variety of contractual arrangements. At December 31, 2025, EOG was committed to deliver to multiple parties aggregate fixed quantities of crude oil of 24 million barrels (MMBbls) in 2026, 11 MMBbls in 2027 and 4 MMBbls in 2028. At December 31, 2025, EOG…
• FY2025 10-K: …and markets crude oil, natural gas liquids (NGLs) and natural gas primarily in major producing basins in the United States of America (United States or U.S.), the Republic of Trinidad and Tobago (Trinidad) and, from time to time, select other international areas, including the Kingdom of Bahrain and the United Arab…
• APA (APA Corporation)
• FY2025 10-K: …expense categories necessary to arrive at the segment profit or loss. (6) Includes Suriname operating expenses as the operating segment has not met the quantitative thresholds to be separately reported. F-50 APA CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 16. SUPPLEMENTAL OIL…
• FY2025 10-K: …that may, over time, result in reportable discoveries and development opportunities. The Chief Operating Decision Maker (CODM) is a function (not necessarily an individual) that allocates the resources of the reporting entity and assesses the performance of its segments. Decisions to assess performance and allocate…
• CTRA (COTERRA ENERGY INC.)
• FY2025 10-K: …For those contracts, the Company has utilized the practical expedient exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. As of December 31, 2025,…
• FY2025 10-K: Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K contain additional information that should be referenced when reviewing this material. This discussion and analysis also include forward-looking statements. Readers are cautioned that such forward-looking statements are based on…
• CHRD (Chord Energy Corp)
• FY2025 10-K: …before it is transferred to the counterparty. In certain cases, we enter into sales and purchases with the same counterparty in contemplation of one another, and these transactions are recorded on a net basis. 56 Table of Content s The following table summarizes our revenues, production and average realized prices…
• FY2025 10-K: …Shale was 45,151 MMcf and 24,727 MMcf, respectively. The realized natural gas price related to this production, prior to the effect of derivative settlements, was $3.15 per Mcf and $1.78 per Mcf for the years ended December 31, 2025 and 2024, respectively. (2) The effect of derivative settlements includes the cash…
• CRC (California Resources Corp)
• FY2025 10-K: …includes operating lease costs and asset impairment. (b) Other profit or loss includes the margin we earn from marketing activities and the margin we earn on sales of electricity from our Elk Hills power plant to customers. (c) Unallocated amounts include net gain from commodity derivatives, net loss on natural gas…
• FY2025 10-K: Segment operating revenues 2,967 - 2,967 Other revenues and income (a) 749 749 Total operating revenues $ 3,669 (a) Other revenues and income includes net gain from commodity derivatives, revenue from marketing of purchased commodities, electricity sales and unallocated interest and other revenue. 136 Year ended…
• FANG (Diamondback Energy, Inc.)
• FY2025 10-K: …or loss and total assets utilized by the CODM are net income and total assets as reported on the consolidated statements of operations and the consolidated balance sheets, respectively. The significant expense categories, their amounts and other segment items that are regularly provided to the CODM are those that are…
• FY2025 10-K: Company's oil sales contracts are generally structured where it delivers oil to the purchaser at a contractually agreed-upon delivery point at which the purchaser takes custody, title and risk of loss of the product. The Company recognizes revenue when control transfers to the purchaser at the delivery point based on…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.