Devon Energy Corp (NYSE:DVN) stock rose 2.55% (As on June 13, 11:59:50 AM UTC-4, Source: Google Finance) after Neil Mehta of Goldman Sachs upgraded the company from Neutral to Buy, while maintaining the price target at $58. Devon Energy’s stock has underperformed peers since the company reported results for its third quarter of 2022, “which we believe was a function of higher capex (due to higher raw material costs/service costs) and lower production (due to midstream outage/weather related downtime) relative to consensus expectations,” Mehta said. “However, following the relative underperformance vs. other large-cap peers, we believe that valuation is becoming more compelling, and see potential for well costs to reduce a function of lower raw material costs (tubulars, sand, among others), and modestly lower pricing,” he added.

Meanwhile, Devon Energy topped Wall Street estimates for first-quarter profit on high demand for crude oil, and raised its share repurchase program by 50% to $3 billion. Devon’s production averaged 641,000 barrels of oil equivalent per day (boepd) in the quarter ended March 31, higher than last year’s 575,000 boepd, driven by a rise in production in it Eagle Ford assets acquired last year. The Oklahoma City-based company posted adjusted earnings of $1.46 per share for the quarter, compared with the average analyst estimate of $1.38 per share, according to Refinitiv data. Excluding hedging costs, Devon said its realized price fell about 24% to $46.44 per boepd for the first quarter. Oil production averaged 320,000 barrels per day in the quarter, which came in 2,000 barrels per day above the company’s midpoint guidance. Operating cash flow totaled $1.7 billion in the quarter, resulting in free cash flow of $665 million. At the end of the first quarter, the company had a cash balance of $887 million and an undrawn credit facility of $3 billion. Outstanding debt totaled $6.4 billion and the company’s net debt-to-EBITDAX ratio was 0.6 times.

Devon declared a dividend of 72 cents per share based on its first-quarter results. The company also increased its share repurchase authorization by 50% to $3 billion. Devon said it still expects to produce 643,000 to 663,000 Boe per day for the full-year 2023. Additionally, total capital investment for the year remains at an expected range of $3.6 billion to $3.8 billion. These capital requirements in 2023 are estimated to be self-funded at pricing levels as low as a $40 WTI oil price.