DVN – Base Case CDS 82bps, Base Case iCDS 62bps, Negative Case iCDS 78bps, 2028 5.875% Bond YTW of 5.582%, iYTW of 4.942%, Baa2 Rating from Moody’s, IG4+ (equivalent to Baa1) Rating from Valens, Low Refinancing Need

March 22, 2024

  • Credit markets are slightly overstating DVN’s credit risk with a YTW of 5.582% relative to an Intrinsic YTW of 4.942%, while CDS markets are accurately stating credit risk with a CDS of 82bps relative to an Intrinsic CDS of 62bps.
  • Incentives Dictate Behavior™ analysis highlights positive signals for credit holders. DVN’s metrics should generally drive management to all three value drivers: margin expansion, asset utilization, and growth which could lead to Uniform ROA expansion and increased cash flows available for obligations going forward . Additionally, management members are material owners of DVN equity relative to their annual compensation, indicating they are aligned with shareholders to pursue long-term value creation for the company. Moreover, all members of management have low change-in-control compensation relative to their annual compensation. This indicates they may not be sufficiently incentivized to pursue a takeover or sale of the company, decreasing event risk for creditors.

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