Devon Energy (NYSE:DVN) Undervalued on Onshore Resource Plays Says Ticonderoga

Devon Energy (NYSE:DVN) is undervalued in almost all the key valuation metrics against its peers, and Ticonderoga Securities said they're maintaining their "Buy" rating on them as a result.

"We view DVN as an undervalued asset base that should generate better results given the shift in focus toward onshore unconventional resource plays. And with $3.6B of cash on hand currently (excluding the expected $3.2B close of Brazilian assets), the company is in a strong financial position as well. The company’s shares are trading below peers on almost all relevant valuation metrics, including at a steep discount to our $118.00 NAV. The resulting P/NAV of 66% compares with a group median of 78% for our E&P universe. DVN’s EV/2010 EBITDA is 5.0 compared with 7.1 for the group and its P/CF is 5.9 compared with 6.4 for the group, said Ticonderoga.

"Today’s news (earnings report) is positive and supports our Buy rating, and should please investors who have been looking for consistent results/growth from DVN quarter-to-quarter. We would look toward the year-end reserve report for signs of better organic growth and improving finding cost as an indication that the company’s resource strategy is working long-term. We don’t believe the sharp discount to peers is justified, and would continue to look for periods of weakness when the stock/group trades down to accumulate shares."

Devon surged to close at $68.22 Wednesday, gaining $2.29, or 3.47 percent. Ticonderoga has a price target of $78 on Devon.

Precision Drilling (NYSE:PDS) Outlook Positive Says Canaccord

After reporting their quarterly results, Precision Drilling (NYSE:PDS) maintained their "Buy" rating from Canaccord Genuity.

Rob McNally, Executive Vice President and Chief Financial Officer, said on the conference call:

"Precision had a very solid quarter. We reported net earnings of $61 million or $0.21 per diluted share on revenues of $359 million for the third quarter. These results do include an $18 million foreign exchange gain which equates to about $0.05 per share relating to our debt being primarily US dollar denominated.

"Our Q3 2010 EBITDA was $113 million, which represents a 31% increase over the $86 million achieved in the third quarter of 2009. The improved third quarter results primarily reflect increased utilization. Activity levels have increased meaningfully with the continuation of positive momentum building from the beginning of the year."

Canaccord said, "We reiterate our rating and target price (based on 6.0x 2011E EV/EBITDA) following PD’s in-line Q3 results; our thesis remains intact as the company has a large mix of high-performance rigs and enjoys geographic diversity across North America. The company also continues to benefit from increasing oil and liquids-rich drilling, pricing traction starting to take in Canada, and moving forward with its new build programs."

Precision closed Friday at $7.76, gaining $0.21, or 2.78 percent. Canaccord has a price target of C$10 on them.

Wells Fargo (NYSE:WFC) Down on Pride International (NYSE:PDE)

Wells Fargo (NYSE:WFC) downgraded Pride International (NYSE:PDE) from "Outperform" to "Market Perform," citing valuation, which they did raise from $32-35 to $34-36.

Wells said, "After strong price performance for the offshore drilling group since 9/7 (+19% on average versus +7% for the SPX), and PDE in particular (+23%), we believe the risk/reward profile for PDE shares is less compelling at current valuation of 7.0x 2011E EBITDA and 120% EV/estimated NAV. While we remain comfortable with our estimates and PDE management's ability to execute, the drilling fleet is largely contracted through 2011, so we see limited opportunity for positive near-term catalysts, to continue this recent outperformance."

Pride ended Friday's trading session at $31.95, gaining $0.15, or 0.47 percent.

Volume for the day was up over 50 percent from its daily 3-month average.