At one time, both Devon Energy (DVN) and Chesapeake (CHK) were the reigning kings of natural gas stocks. The duo were the hottest ticket for investors as the two natural gas stocks fracked their way into America’s various shale formations and unearthed a ton of energy.
Unfortunately, they fracked a bit too hard.
As both DVN and CHK stock drilled, an interesting thing happened. A relatively warm winter one year, coupled with rising supplies of natural gas, pushed prices for the fuel into the toilet. Earnings plunged for CHK and DVN stock, as did their share prices. Devon and Chesapeake spent much of the time since digging out of the mess they made.
Well, what a difference a few years makes. Natural gas prices are once again at new highs, and things are beginning to look up for the natural gas sector. That makes both DVN and CHK stock interesting values in the new year.
However, the question remains: Is DVN or CHK the better natural gas stock? With that in mind, let’s take a look at what each of these fracking superstars has to offer — and whether CHK or DVN stock steals the natural gas stock crown.
DVN Stock — Devon Is Making The Right Moves
After the recent fall in natural gas prices, DVN realized that it needed to change … fast.
The key for DVN stock is that the firm isn’t really just about natural gas anymore. The name of the game is now more about liquids and shale oil production. And that new focus is providing the real catalyst for Devon’s future gains.
DVN stock has been aggressively shedding non-core assets while increasing its holdings in some of the biggest and most promising oil fields in the U.S. This includes by $6 billion worth of Eagle Ford exposure from privately held GeoSouthern last year. More recently, DVN sold nearly $3 billion worth of Canadian natural gas fields to Canadian Natural Resources (CNQ).
This emphasis on shale oil and natural gas liquids has been working. DVN now receives about 44% of its total production from liquids, versus only about 39% this time last year. And that’s a good thing for DVN stock.
That increase in production is driving cash flows an earnings for DVN stock. For the fourth quarter, DVN stock reported a 26% pop in operating cash flows, and margins per barrel of oil equivalent (BOE) rose 15%.
Add its recent plans to merge its pipeline and gathering assets into MLP Crosstex Energy LP (XTEX), and DVN stock seems to have gotten its mojo back.