The oil and gas industry plays a vital role in the global economy, supplying the primary energy source for transportation, manufacturing, power generation and more. It involves the exploration, extraction, refining, transport, and sale of petroleum products. While the shift to renewables is accelerating, oil and gas remain indispensable due to their high energy density and established infrastructure. Devon Energy Corporation DVN and Occidental Petroleum Corporation OXY are major U.S. oil and gas producers with strong positions in the Permian Basin, and both are leveraged to oil price movements and enhance shareholders’ value through dividends and buybacks.
Devon Energy is a leading independent oil and natural gas exploration and production company, primarily operating in the United States. The company's multi-basin portfolio and focus on high-quality assets and strategic acquisitions continue to expand operations and boost production. Devon continues to manage costs to boost margins. It has been reducing its costs by selling higher-cost assets and bringing new, lower-cost production assets online.
Occidental Petroleum is a major international oil and gas company with operations spanning upstream exploration and production, midstream logistics, and chemical manufacturing through its OxyChem division. The company continues to produce strong hydrocarbon volumes and is utilizing non-core asset sales proceeds and excess cash flow to reduce outstanding debts and strengthen its balance sheet. Occidental Petroleum's persistent focus on Permian resources has been beneficial for the company. Its core development area in the Permian region has been recording solid results.
The Zacks Oil and Energy sector's performance is influenced by geopolitical events, regulations, market demand and technological advances, making it both cyclical and strategically significant. Amid such backdrop, let’s delve deep and closely look at the fundamentals of these stocks.
DVN & OXY’s Earnings Growth Prospects
The Zacks Consensus Estimate for DVN’s 2025 earnings indicates a year-over-year decline of 5.81%, while 2026 estimates suggest year-over-year growth of 1.1%. Long-term (three to five years) earnings growth per share is pegged at 11.01%.
DVN Earnings Estimates
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The Zacks Consensus Estimate for OXY’s 2025 earnings suggests a year-over-year decline of 26.01%, while 2026 estimates indicate year-over-year growth of 19.42%
OXY Earnings Estimates
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Return on Equity (ROE)
ROE measures how efficiently a company is utilizing its shareholders’ funds to generate profits. DVN’s current ROE is 22.52% compared with OXY’s ROE of 16.33%. ROE of both companies is higher than their sector’s ROE of 15.44%.
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Debt to Capital
Oil and gas industry is capital intensive and companies need to borrow funds in addition to cash generated from international operations to successfully run its operations. Excessive debt in the balance sheet increases interest expenses and impacts margins.
Devon Energy’s debt to capital currently stands at 36.35% compared with Occidental’s debt to capital of 42.01%. Occidental is working to reduce its debt level, but it still utilizes more debt to run its operation compared with Devon. Since OXY’s current ratio at the end of the fourth quarter of 2024 was 0.95 compared with Devon’s 1.04, it can create liquidity challenges for OXY over the long run.
Valuation
Devon Energy currently appears to be cheaper compared with Occidental Petroleum on trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA).
Devon Energy is currently trading at 3.76X, while Occidental is trading at 5.09X, compared with their sector average of 4.38X.
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Long-Term Capital Expenditure Plans
Oil and Gas operations are capital-intensive, and a large investment is required for proper maintenance and expansion of operations. The decline in interest rates will definitely assist the oil and gas companies as it will reduce the cost of long-term capital projects.
Devon Energy invested $3.64 billion in 2024 and aims to invest in the range of $3.8-$4 billion in 2025. The company has been making strategic investments to upgrade and expand assets.
Occidental Petroleum, being a low-cost operator invested more than $7 billion to strengthen and expand its existing operations and aims to invest in the range of $7.4-$7.6 billion in 2025.
Both companies are making strategic investments in their service regions to further strengthen their operation.
DVN & OXY Dividend Yield
Both oil and gas companies generate ample free cash flow and increase the value of their shareholders through dividend payments.
Devon Energy’s current dividend yield is 3.07%, and the company has raised its dividend 11 times in the past five years. Occidental Petroleum raised its dividend five times in the past five years, and the current dividend yield is 2.38%. The dividend yields of both companies are better than the Zacks S&P 500 Composite’s average of 1.65%.
Hedging of Production
To safeguard itself against fluctuating oil, NGL and natural gas prices, Devon Energy has hedged 2025 production volumes.
Occidental Petroleum’s practice is to remain exposed to market prices of commodities, so if the commodity prices drop substantially from their current level, it will definitely impact Occidental Petroleum’s performance. As of Dec. 31, 2024, there were no active commodity hedges in place.
Price Performance
In the past three months, shares of Devon Energy lost 11.1%, narrower compared with Occidental’s decline of 15.8%.
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Conclusion
Devon Energy and Occidental Petroleum both currently have a Zacks Rank of 3 (Hold) each and are strong operators in the oil and gas space. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Devon Energy holds a slight advantage due to its strategic focus on multi-basin domestic assets. This U.S.-centric approach helps Devon avoid many of the geopolitical and regulatory risks that Occidental Petroleum must navigate due to its broader international exposure.
Based on the above discussion, at present Devon Energy has a marginal edge over Occidental Petroleum.
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