Can Devon Build a Resilient Portfolio Through Targeted Acquisitions?

Devon Energy Corporation DVN, an oil and gas producer, has pursued a disciplined acquisition strategy to expand its asset base, boost operational scale and enhance shareholder returns. The company's merger with WPX Energy in 2021 marked a turning point, creating a premier operator in the Delaware Basin. This all-stock transaction not only bolstered Devon’s production portfolio with high-margin assets but also resulted in significant cost synergies and improved capital efficiencies.

Devon has continued to seek opportunistic acquisitions, such as the purchase of Validus Energy for $1.8 billion in 2023, expanding its footprint in the Eagle Ford shale. The company also acquired the Williston Basin business of Grayson Mill Energy in 2024. These acquisitions complement Devon’s core operations by diversifying production sources, increasing inventory depth and improving cash flow resilience across commodity cycles. 

Acquiring accretive assets, Devon is able to maintain a lean cost structure while strengthening its position in resource-rich basins. DVN's acquisition strategy is expected to drive sustainable production growth, free cash flow generation and capital returns. The company has prioritized assets with high returns on investment and low breakeven costs, which enhances its ability to return excess cash to shareholders through the fixed-plus-variable dividend framework and share buybacks. This positions Devon as a shareholder-friendly E&P with strong capital discipline.

With a strong balance sheet and continued focus on disciplined growth through strategic acquisitions, Devon is well-positioned to deliver consistent value creation and long-term outperformance.

Oil and Gas Companies Benefit From Acquisitions

Oil and gas companies benefit from acquisitions by broadening their asset portfolios, boosting operational efficiency and realizing cost savings. These strategic moves increase scale, diversify resources and improve cash flow stability, enabling stronger performance and returns across fluctuating commodity price environments.

Oil and gas companies like Occidental Petroleum OXY and Chevron CVX have enhanced their portfolios through key acquisitions. Occidental’s takeover of Anadarko significantly boosted its position in the Permian Basin and increased cash flow generation. Chevron’s acquisition of PDC Energy added cost-efficient assets in the DJ and Permian Basins, enhancing capital productivity. These strategic moves strengthen both companies' ability to deliver stable returns amid market fluctuations.

DVN’s Earnings Estimates

The Zacks Consensus Estimate for 2025 earnings per share indicates a year-over-year decline of 19.09% and the same for 2026 earnings per share indicates a year-over-year increase of 3.11%.

DVN’s Shares Trading at a Discount

Devon’s shares are inexpensive on a relative basis, with its current trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA TTM) being 3.55X compared with the industry average of 10.99X.

DVN’s Price Performance

Devon’s shares have gained 5.2% in the past three months compared with the Zacks Oil & Gas- Exploration and Production- United States industry’s rise of 10.7%.
 

DVN’s Zacks Rank

DVN currently has 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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This article originally published on Zacks Investment Research (zacks.com).

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