SmOKEy Skies, Cloudier Growth: Downgrade to Hold With Less Clear Path Ahead

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SmOKEy Skies, Cloudier Growth: Downgrade to Hold With Less Clear Path Ahead

rable, oil-weighted cash

flow engine rather than a primary growth driver. Following the $5 billion Grayson Mill acquisition,

management has focused on high-grading the asset base, maintaining roughly stable production

levels, improving capital efficiency through longer laterals and new completion technologies, and

maximizing free cash flow generation. At the same time, DVN's broader portfolio strategy continues

to favor the Delaware Basin, where the company sees greater scale, inventory depth, and growth

opportunities. Notably, management has previously shifted capital away from the Bakken toward

higher-return Delaware opportunities, and investor debate today centers on whether the Bakken is

being managed for long-term cash generation rather than meaningful production growth. In the

wake of the Iran conflict and higher oil prices, DVN has not signaled any material change in its

Bakken development plans, instead reiterating its commitment to capital discipline and returns-

based allocation. Because of the above, it doesn't seem immediately clear to us that DVN would

meaningfully re-engage in the Bakken as even if it viewed the commodity backdrop sufficient to

increase production it would likely allocate resources towards the faster growing Delaware Basin.

Is there pricing risk in the Bakken? Another debate surrounding the Bakken is pricing risk borne out by

producers seeking operational and cost efficiencies in the basin that may create downside pressure on

gathering, processing, and NGL fees. Today, we continue to model largely flat G&P and NGL processing

fees across our forecast period, which we view as an appropriately conservative assumption given the