Dark pool activity was detected in DVN stock on January 7, 2020. We are seeing lots of bullish activity in energy sector stocks as we enter into the seasonally strong time of year for energy. The increased hostilities between the US and Iran is putting a bid under oil which is also helping many energy sector stocks to move higher.
We think the two dark pool orders that together represented 27% of the average daily volume in DVN stock, were buy orders because of how the price of DVN immediately went up after the prints.
On December 17, 2019, Devon Energy Corp. (NYSE: DVN) announced it has entered into a definitive agreement to sell its assets in the Barnett Shale to Banpu Kalnin Ventures (BKV) for $770 million. This transaction is subject to customary terms and conditions and is expected to close in the second quarter of 2020. Devon expects no incremental cash taxes associated with the divestiture of these assets.
“Devon’s transformation to a U.S. oil growth business is now complete,” said Dave Hager, president and CEO. “The timely and tax-efficient exit from Canada and the Barnett this year has generated $3.6 billion of proceeds at accretive multiples to Devon’s current valuation. Furthermore, these transactions accelerate efforts to focus exclusively on our resource-rich U.S. oil portfolio, where we have the ability to substantially increase returns, margins and profitability.
“The Barnett Shale has been a cornerstone asset for Devon over the past two decades,” said Hager. “With this change in ownership, it is great to see our talented and innovative employees supporting this high-quality gas asset transition to a world-class company like Banpu.”
Devon also announced on December 17, 2019, that its board of directors has authorized a new $1 billion share-repurchase program, bringing the total repurchase authorization to $6 billion. The new program expires on Dec. 31, 2020, and $800 million of the $1 billion authorization is conditioned upon the closing of the Barnett transaction. To date, Devon has repurchased 144 million shares, or nearly 30 percent of outstanding shares, at a total cost of $4.8 billion.
“Today’s announcement to expand our industry-leading share repurchase program is consistent with our disciplined capital allocation strategy and demonstrates our firm commitment to return capital to shareholders,” said Jeff Ritenour, executive vice president and chief financial officer. “Given our strong balance sheet and projected free cash flow, this new authorization will provide us additional flexibility to continue the return of cash to our shareholders.”
“This deal represents our continued belief in the long-term potential of U.S. shale gas and is fully in line with Banpu’s vision of developing a greener and smarter energy portfolio,” said Christopher Kalnin, CEO of BKV.
The Barnett transaction represents BKV’s seventh transaction since 2016, with over $1.3 billion of capital deployed into gas-weighted assets. This acquisition will make BKV a significant producer of natural gas in the U.S. with over 780 million cubic feet per day of production from assets in Pennsylvania’s Northeast Marcellus and now in the Barnett Shale.
Jefferies and Citi acted as financial advisors to Devon on the Barnett Shale transaction. Vinson & Elkins LLP acted as legal advisor to Devon. Willkie Farr & Gallagher LLP acted as legal advisor to BKV.
On December 10, 2019, JPMorgan analyst Arun Jayaram is more sanguine on the Exploration & Production sector heading into 2020. The transition to free cash flow that began in 2019 should support better free cash flow metrics and cash return given efficiency gains and oilfield services deflation, Jayaram tells investors in a research note. Further, U.S. shale growth is poised to disappoint, which could lift the back end of the curve, a key for new money entering the space, adds the analyst. As part of his 2020 outlook, Jayaram upgraded Devon Energy (DVN) to Overweight from Neutral and Hess Corp. (HES) to Neutral from Underweight. His top picks include Cabot Oil & Gas (COG), Concho Resources (CXO), Devon, EOG Resources (EOG), Diamondback Energy (FANG), Parsley Energy (PE), Pioneer Natural (PXD) and WPX Energy (WPX).