Devon Energy (NYSE: DVN) is an oil/natural gas exploration company, with operations in the U.S., Canada, and abroad.

Readers of this space know that one argument forwarded here is that in the era of elevated energy prices, oil/natural gas companies are likely to remain promising plays for the foreseeable future, baring the discovery of a cheap, widely-available, alternative energy. And among oil/natural gas companies, Devon Energy is worth an evaluation.

Analysts like DVN's sizable proved oil/gas reserves of 2.34 billion barrels of oil equivalent. Production volume should increase 4-5% in 2007 and 7-11% in 2008. Analysts also like Devon's strategy decision to sell international assets with lower growth prospects. Meanwhile, the company's overall costs remain reasonable.


Further, recent discoveries have shifted DVN's operational focus to growth from acquisitions, and have also increased production growth prospects through 2015. The Reuters F2007/F2008 EPS consensus estimates for DVN are $6.36/$7.72.

Moreover, Devon, like much of the market, has pulled back during the market's recent slump. View that pull-back as a buying opportunity, if you're an investor who can tolerate moderate risk. The argument here is that a promising oil/natural gas play with a p/e of about 14 is a bargain. If you tend to differ, drive by your local gasoline station.

The risks? Changes in economic and commodity price conditions would hurt DVN's results, as would a decrease in production output.

The First Call mean rating for DVN is: Buy. [24 firms.] Mean 2008 target: $97.00. [high: $122, low: $68.]

Stock Analysis: Devon Energy is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from DVN's shares. Sell / Stop Loss if you were to purchase shares in this company: $53.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.