Why Devon Energy shares plunged nearly 13% in September

Shares of Devon Energy (DVN 3.19%) According to data from, fell by 12.6% in September S&P Global Market Intelligence. This was due to lower oil prices. This offset the positive effect of completing a groundbreaking acquisition.

Dejected despite a big deal

Oil prices came under renewed pressure last month. WTI, the main U.S. oil price benchmark, fell another 7.3% in September to close the month at around $68 a barrel. In the last quarter it has now fallen by 16.4%.

The main factor is the potential for a surge in new supply later this year OPEC increases its production in December as planned. This potential increase in production is coming at once as demand concerns increase due to a possible surge Slowdown in the global economy. Lower oil prices would impact cash flow Oil reserves like Devon, which is why it was under pressure last month.

The fall in crude oil prices overshadowed some notable news from Devon last month. The oil company completed its strategic acquisition of Grayson Mill Energy. The transformative $5 billion deal will significantly improve the company’s operations in the Williston Basin. This will increase the company’s size in the region while reducing costs, putting it in a stronger position to generate free cash flow when oil prices are lower.

The Grayson Mill Energy transaction is expected to be extremely profitable for Devon Energy. It acquired the company with a free cash flow yield of 15% based on an oil price of $80. It’s still like that a very attractive one Purchase at the current price.

The highly accretive nature of the deal drove Devon Energy to significantly expand the authorization to buy back shares. The plan was increased by 67% to $5 billion by mid-2026. That will give the company more opportunities to buy back its cheap shares. Devon is trading at $70 oil with a free cash flow yield of about 9% following the deal with Grayson Mill Energy. That’s a discount of more than 50% on the S&P 500 and three times cheaper than that Nasdaq.

This high quality oil supply is on sale sale

Devon Energy shares slumped last month due to lower oil prices. As a result, the company is trading at a rock-bottom valuation, especially after completing the highly accretive deal for Grayson Mill Energy. The company can use its improved free cash flow from this transaction to repurchase even more of that dirt cheap stocks that should create a lot of value for their shareholders in the long term. It makes Devon one very A compelling investment opportunity for those looking for a valuable investment in the oil sector.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.