Barclays Reviews N.A. Oil & Gas: Upgrades Devon, Downgrades Ultra

In a report published Tuesday, Barclays analyst Thomas Driscoll reviewed the North American Oil & Gas E&P large cap sector.

Driscoll upgraded Devon Energy DVN from Equal-weight to Overweight and downgraded Ultra Petroleum UPL from Overweight to Equal-weight.

Barclays remarked on its balance sheet adjusted growth rate correlation with share prices, as “very good proxies for returns on new capital."

In evaluating the r-squared correlation of share price performance and cash flow over 10 years, the analyst reported that balance sheet adjusted cash flow growth has been within 89 and 90 percent.

Driscoll noted that Devon Energy has significantly improved its portfolios, leading to the upgrade.

The Ultra Petroleum downgrade is directly based on valuation of shares.

Barclay's projected group-average of balance sheet adjusted growth in 2014 through 2016 is six to 11 percent, similar to the past six years. Share price returns are expected to be within eight and 13 percent.

Shares of Devon Energy are currently up 2.1 percent at $72.84. Ultra Petroleum is trading at $26.91, up 0.30 percent.