Per media reports, independent energy company Devon Energy Corporation DVN is currently into discussions to acquire Felix Energy LLC, a smaller operator in the oil and gas space, for nearly $2 billion.
Devon has been doing pretty well through investments and development of its Permian Basin and Eagle Ford Shale acreage, which will play a vital role to meet its new oil production year-over-year growth target of 31% to 33% in 2015. The company plans to further strengthen its portfolio and improve production through inorganic measures.
Crude oil prices have come down drastically from the high of $110+ per barrel to $40 per barrel this week. The primary reason for the slide in oil prices is higher production due to the U.S. shale boom. This has been further aggravated by OPEC’s decision of not curtailing production in spite of the slump in prices.
Low oil prices have stretched the margins of large oil and gas companies so much so that an improvement in oil production volumes had little effect on their results. However, the price of crude oil is not going to remain at the depressed level for long. Industry pundits opine that prices will start showing signs of improvement from the second half of 2016.
Devon Energy’s decision to add new oil assets to its portfolio is based on the prospects of an oil recovery. Felix Energy’s assets are located near Devon’s existing oil and gas acreage as well as midstream infrastructure in the STACK Play of Northern Oklahoma.
The acquisition will increase Devon Energy’s acreage in STACK Play. This new play has ample prospects and will support production going forward. We need to wait a little longer to find out whether the market rumor turns out to be true.
Devon currently has a Zacks Rank #2 (Buy). Other favorably ranked oil and gas exploration and production stocks include Cobalt International Energy, Inc. CIE, Chesapeake Energy Corporation CHK and Linn Energy, LLC LINE. All three stocks have the same Zacks rank as Devon Energy.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment