QS Research · Michael Burry's Scion Capital analyst template · 2006
DEVON ENERGY CORP/DE (DVN)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $43.41 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case -13% · downside -36% · upside +15%
The market is capitalizing TTM post-merger cash flow of $5.22B (a 10.5% FCF yield) as if it is mid-cycle, but the post-deal FY2020-FY2025 average net income is $2.57B versus $3.60B TTM, and at the peer median 11.95x P/E the stock is worth $37.86 (-12.8%). A 25% earnings decline with the P/E compressing to about 11.65x gives $27.6 (-36.5%); a 15% synergy-driven earnings uplift at today's 13.7x gives only about $49.8 (+14.6%). With no base +30% and a downside worse than -25%, neither long nor short clears the rule; this is a pass. The normalized average is below TTM, so the apparent cheapness on trailing cash flow is not enough to create an edge.
Key numbers
- Share price: $43.41
- Market cap: $49.47B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $23.22B
- EV / EBITDA (TTM): 6.1x
- P/E (TTM): 13.7x
- FCF yield: 10.5%
- Price / book: 1.18x
- Earnings-quality flags (TTM): none flagged
- P/E, operating (tax-normalized) (TTM): 12.4x
- EV / FCF (TTM): 11.6x
- Revenue growth (latest fiscal year): +5.4%
- ROIC (TTM): 7.4%
- WACC: 6.0%
- Economic profit spread: +1.4 pts
The 15 boxes
- ✓ 1. Long-form business notes
Devon is an unconventional oil and gas producer whose top line swung from $4.67B in FY2020 to $19.83B in FY2022 and $23.22B on a TTM basis to 2026-09-30, with the FY2020 pre-tax loss of $3.09B and net loss of $2.68B representing the cycle trough rather than a permanently unprofitable business. Cash is the cleaner measure here: operating cash flow was $6.60B in FY2024, $6.71B in FY2025 and $9.67B TTM, against capex of $3.65B, $3.59B and $4.45B, with D&A (the depletion proxy) climbing from $1.30B in FY2020 to $4.89B TTM. Management has returned cash every year since FY2021 ($1.06B buybacks FY2024, $1.05B FY2025, $930M TTM) while carrying $8.4B of total indebtedness at 2025-12-31. The leap in TTM total equity to $42.01B and diluted shares to 899M from 633M in FY2025 is not explained by the sources, which describe a Coterra merger as still pending at the 2026-02-18 10-K date.
- ✓ 2. Competitive advantage
Devon looks like a price-taking commodity producer with a real but modest cost position, not a franchise. As of January 2026 essentially all oil and gas was sold at variable, market-sensitive prices, and realized oil fell from $75.98/Bbl (FY2023) to $62.77 (FY2025) while production cost per Boe stayed near $9 ($8.87, $8.76, $8.98). Scale is real (18,549 gross / 7,329 net wells, 2.369M net acres, 336.6 net wells drilled in FY2025 with no dry holes), but results track price: pre-tax income ran -$3.09B (FY2020) to $7.78B (FY2022) to $3.47B (FY2025). The 10-K names no competitors at all — its Competition section is a one-line cross-reference to the risk factors.
- ✓ 3. 10-Q takeaways
The Q3 2026 10-Q (filed 2026-11-06) covers the first full post-merger quarter: oil, gas and NGL sales of $5.9 billion on 1,668 MBoe/d, net earnings of $1.0 billion ($0.88/diluted) after a $(729) million commodity hedge valuation charge, and core earnings of $1.6 billion ($1.42/diluted) per the same-quarter release. Cash generation was strong — $2.8 billion operating cash flow and $2.0 billion adjusted free cash flow — with $414 million of buybacks and $366 million of dividends paid, ending with $413 million of cash and $10.2 billion net debt (0.9x trailing twelve-month EBITDAX as the release states it). Guidance is numeric: Q4 2026 of 1,660,000–1,700,000 Boe/d, 550,000–560,000 Bbl/d oil and $1,290–1,395 million capital, plus an initial 2027 view pro forma for the $4.2 billion Eagle Ford sale. Item 1A reports no material risk-factor changes from the 2025 Form 10-K.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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