Despite OPEC’s best efforts, oil prices haven’t held up as well as expected, tumbling back below $50 per barrel over the past month. That decline has taken many top energy stocks down with it, including Devon Energy (NYSE:DVN), TransCanada (NYSE:TRP), and National Oilwell Varco (NYSE:NOV). However, given the improvements these energy giants made over the past year, they have the potential to create tremendous value for investors as they deliver on their growth plans. Because of that, investors should seriously consider taking advantage of the market’s recent weakness to stock up on these energy stocks.
Getting back to work
Devon Energy’s stock is down nearly 5% over the past month — and is down double digits for the year — thanks to the recent slump in oil prices. However, the shale driller’s best days appear to be ahead of it. That’s because the company spent the oil market downturn focused on repositioning its portfolio, shoring up the balance sheet, and reducing costs. The results have been remarkable.
Thanks to the strength of its acreage position, Devon Energy delivered the best drilling results in its 45-year history last year. New wells delivered an average 90-day initial production rate of nearly 750 barrels of oil equivalent per day, a more-than-300% improvement from 2012. Because the company is drilling more productive wells, and at lower costs than ever before, it can drill more wells with less money. As a result, oil production, which declined last year, should increase by 13% to 17% over the course of this year. Meanwhile, Devon has the asset base to accelerate its growth rate up to 20% next year if oil prices cooperate. That high-margin oil growth puts the company in the position to deliver peer-leading cash flow growth. It’s a formula that should create value for investors over the long term, even if oil prices remain weak.