Our $43 target price is based on a ~5x multiple applied to our 2025E DACF estimate in a normalized commodity price environment, which we define as $65 WTI and $3.50 HH. Based on Citi's most recent 2025 commodity price deck ($64 WTI and $4.25 HH), our target price also implies a ~5x multiple.

The primary risk to owning an E&P is the potential for a correction in oil and/or natural gas prices. Operational execution is also vital, as the inability of the company to meet production, cost or capital spending targets could have a material impact on the stock. In addition, we highlight the following factors that relate specifically to Devon:

Well Productivity – With oil production maintenance/modest growth pinned on US shale plays, disappointing well productivity, particularly in the Delaware Basin, could impact Devon's share performance.

Federal Acreage Exposure – Roughly 35% of Devon's pro forma Delaware Basin and a greater portion of its PRB acreage is on federal lands. Federal acreage carries potential perceived political risks given uncertainties around future permitting, leasing, and development policies.

Deal Integration – Rationale behind Devon’s merger with WPX Energy was driven by the increased scale and cost synergies of the combined companies. Any difficulties around merger integration or an inability to achieve cost synergy targets could cause the stock to underperform. Similarly, additional synergies vs. expectations could lead to outperformance.

If the impact on the company from any of these factors proves to be less than we anticipate, the stock could materially outperform our target. Conversely, if the impact on the company from any of these factors proves to be greater than we anticipate, the stock could underperform our target price.