Devon Energy added as a new short idea at Hedgeye

Deven Energy (NYSE:DVN) was added as a new short idea at Hedgeye on Monday, with the potential for 25% downside from current levels.

“Devon’s multi-basin approach is not a problem in itself,” Hedgeye analyst Fernando Valle wrote in a note published on Monday near the close of regular trading. “But its recent deals in the Williston/Bakken point to management believing that either oil prices are bound for a significant recovery and/or that it can meaningfully increase the economics of refracs.”

Valle sees the 25% downside from here at WTI $75/bbl and Henry Hub of $3/mcf.

“By taking on significant debt to acquire Grayson Mill it’s in a much weaker position to ride out short-term headwinds for oil demand and natural gas prices,” Valle added.

Devon (DVN) has short interest of 3%. Shares of Devon rose 1.6% on Tuesday. WTI (CL1:COM) jumped up 3% to above $70/barrel. Brent (CO1:COM) moved up 3% to nearly $74/barrel after reports that Iran was preparing to imminently launch a ballistic missile attack on Israel.