JP Morgan: Devon Energy Corporation (DVN.US) owns high quality core shale assets, currently undervalued and providing a good buying opportunity.

As international crude oil prices rise, driving up the stock prices of most oil and gas producers, Devon Energy Corporation (DVN.US) closed up 1.8% on Monday. At the same time, after the research restriction period following the Coterra merger transaction, JPMorgan resumed coverage of Devon Energy Corporation and gave it an "overweight" rating with a year-end target price of $62. JPMorgan analyst Arun Jayaram stated that since the announcement of the merger with Conterra earlier this year, Devon Energy Corporation's stock performance has lagged behind its large exploration and production peers by about 9%. He believes that this underperformance may reflect various factors, including: arbitrage pressure before the completion of the transaction; the company has not yet announced formal post-merger performance guidance; market uncertainty about the future asset portfolio; and the recent high prices in the U.S. federal oil and gas leasing auctions causing a "price shock". The analyst believes that Devon Energy Corporation currently offers an attractive buying opportunity for reasons such as: attractive absolute and relative valuations; significant synergies to be released; potential start of asset portfolio optimization process in the future to unlock more value; stock valuation disconnect from fundamentals, providing favorable conditions for a more aggressive stock buyback plan. The analyst pointed out that Devon Energy Corporation has highly competitive land reserves in several of the highest-quality shale oil and gas producing regions in the U.S., including the core area of the Delaware Basin, Bakken Formation shale area, and Eagle Ford Shale area. In addition, the company also has options and development space for projects in the STACK oil and gas area and Powder River Basin. The analyst stated that Devon Energy Corporation's core asset portfolio has the potential to provide a large number of low-risk, high-return development drilling opportunities, thus providing solid support for the company's future years of production growth and cash flow creation.