The companies operating in the Zacks Oil-Energy sector remain a key driver of the global economy, providing essential energy for transportation, manufacturing, electricity generation and other industries. Its operations span exploration, production, refining, transportation and the marketing of petroleum products. Despite the rapid growth of renewable energy, oil and gas continue to play a crucial role due to their high energy density and well-established infrastructure.
Ongoing geopolitical tensions in the Middle East have disrupted global oil supplies, pushing crude prices higher. Rising prices benefit U.S. producers by boosting realized prices and margins. Companies like Devon Energy Corporation DVN and Occidental Petroleum Corporation OXY often see stronger cash flows and earnings in such environments. With most of their production in the United States, higher benchmark prices directly lift revenues while supporting drilling activity and shareholder returns.
Devon Energy, a top independent oil and natural gas producer in the United States, operates a diversified multi-basin portfolio, highlighted by the prolific Permian Basin. The company drives growth and increases production through a combination of organic assets and strategic acquisitions. Maintaining a focus on cost efficiency improves margins by divesting higher-cost assets and developing more efficient, lower-cost projects. Additionally, a proposed merger with Coterra Energy is planned for mid-2026.
Occidental Petroleum, a global oil and gas company with integrated upstream and midstream operations, continues to deliver strong hydrocarbon production while prioritizing debt reduction and balance sheet strength. Its focus on the Permian Basin remains a key growth driver. Recently, Occidental Petroleum completed the $9.7 billion sale of its OxyChem chemical business to Berkshire Hathaway, using $6.5 billion of the proceeds to reduce debt. This move allows the company to concentrate on its core oil and gas assets.
The performance of the Zacks oil and energy sector is influenced by geopolitical events, regulatory shifts, changing market demand and technological advancements. It plays a critical role in supplying energy to key global industries. Current Middle East tensions are disrupting global oil and gas supply, creating a volatile market environment. Against this backdrop, it is important to closely examine the fundamentals of leading stocks in the sector to understand their performance and growth potential.
DVN & OXY’s Earnings Growth Prospects
The Zacks Consensus Estimate for DVN’s 2026 and 2027 earnings indicates a decline of 3.99% and 8.56%, respectively, in the past 60 days.
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The consensus estimate for OXY’s 2026 and 2027 earnings indicates an increase of 77.89% and 25.56%, respectively, in the past 60 days.
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Return on Equity
Return on equity (“ROE”) measures how efficiently a company is utilizing its shareholders’ funds to generate profits. DVN’s current ROE is 16.28% compared with OXY’s 9.89%. ROE of Devon Energy is also higher than their sector’s ROE of 14.15%.
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Debt to Capital
The oil and gas industry is capital-intensive, and companies need to borrow funds in addition to cash generated from international operations to successfully run their operations. Excessive debt in the balance sheet increases interest expenses and impacts margins.
Devon Energy’s debt to capital currently stands at 35.44% compared with Occidental Petroleum’s debt to capital of 37.96%. Occidental Petroleum is working to reduce debt level, but it still utilizes more debt to run the operation compared with Devon Energy.
Valuation
Devon Energy currently appears to be cheaper compared with Occidental Petroleum on trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA).
DVN is currently trading at 5.45X, while OXY is trading at 7.11X
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Hedging of Production
To safeguard itself against fluctuating oil, NGL and natural gas prices, Devon Energy has hedged 2026 production volumes.
Occidental Petroleum’s practice is to remain exposed to market prices of commodities. So if the commodity prices drop substantially from their current level, it will definitely impact OXY’s performance. As of Dec. 31, 2025, there were no active commodity hedges in place. OXY is well-positioned to benefit from rising oil prices in early 2026 due to its hedge free model, allowing it to capture higher market prices directly.
DVN & OXY Dividend Yield
Both oil and gas companies generate ample free cash flow and increase the value of their shareholders through dividend payments.
Devon Energy’s current dividend yield is 1.97%. The company has raised its dividend eight times in the past five years. Occidental Petroleum raised its dividend four times in the past five years, and the current dividend yield is 1.71%. The dividend yields of both companies are better than the Zacks S&P 500 composite’s average of 1.48%.
Capital Expenditure Plans
Oil and Gas operations are capital-intensive, and a large investment is required for proper maintenance and expansion of operations. The current benchmark interest rate is fixed in the range of 3.5-3.75%, which will be beneficial for capital-intensive oil and energy stocks.
Devon Energy invested $3.6 billion in 2025 and aims to invest in the range of $3.5-$3.7 billion in 2026. The company has been making strategic investments to upgrade and expand assets.
Occidental Petroleum invested $6.2 billion in 2025 and aims to invest in the range of $5.5-$5.9 billion in 2026.
Both companies are making strategic investments in their service regions to further strengthen their operations.
Price Performance
In the past three months, shares of Devon Energy have gained 33.9% compared with Occidental Petroleum’s rally of 50.8%.
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Summing Up
Devon Energy and Occidental Petroleum are two large oil and gas operators with strong operations in the United States.
Both companies are evenly matched in most of the metrics mentioned above. However, OXY is currently gaining more in the current oil price hike, as a lack of active hedging is likely to result in increased cash flow for it.
Occidental Petroleum has a marginal edge over Devon Energy, given its strong revision in earnings estimates, elaborate capital expenditure plan and better share price performance in the past three months.
Devon Energy and Occidental Petroleum currently carry a Zacks Rank of 3 (Hold) each.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).