Updated from from 12:19 p.m. ET to include advisors and additional analyst comments.

NEW YORK (TheStreet) - Devon Energy's (DVN) transformation into a pure-play onshore oil and gas driller is complete with the company's $2.3 billion sale of non-core assets to upstream master limited partnership (MLP) Linn Energy (LINE). Devon Energy, unlike peers such as Occidental Petroleum (OXY), Marathon Oil & Gas (MRO) and Hess (HES), was able to affect its turnaround under CEO John Richels without the hand of a vocal activist investor.

On Monday, Devon Energy said its non-core asset sale consisted of properties in the Rockies, the onshore Gulf Coast and the Mid-Continent regions of the U.S. would raise $1.8 billion after taxes. In total, Devon has raised $5 billion in recent months from asset sales in the U.S. and Canada, and the spinoff of its EnLink Midstream (ENLK) business.

The asset sales do two things, both for the company and its investors. It rationalizes Devon Energy's operations, which had been discounted by investors amid production shortfalls and balance sheet troubles. They also are helping Devon Energy identify ways to grow its oil and liquids production volumes in coming years.

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In late 2013, Devon Energy agreed to buy GeoSouthern Energy, a driller focused on the Eagle Ford shale, for $6.3 billion in cash. Devon took on significant debt in that deal; however, with a heavy slate of asset sales and spinoffs in 2014, the company now expects to pare its net debt by $4 billion by year-end.

As initial production numbers come in on the GeoSouthern deal, analysts at both Bank of America and Wells Fargo now expect the acquisition to drive Devon Energy's stock.

Transformation Complete

Devon Energy's non-core asset sale to Linn Energy on Monday may perhaps be the company's most straightforward deal in recent memory. It also may prove a pivotal moment in Devon Energy's transformation, with the company stating on Monday it is now no longer in turnaround mode.

"With the sale of our remaining non-core assets, the portfolio transformation that we announced late last year is now complete," CEO Richels said in a Monday statement. ""In a short period of time we transformed our portfolio through three significant steps: the accretive Eagle Ford entry, the innovative creation of EnLink Midstream, and the sale of our non-core properties," he added.

Devon Energy once was among the largest independent drillers by revenue in the United States, with a portfolio tilted towards natural gas production and operations spanning onshore drilling fields, the offshore Gulf of Mexico and international operations in Canada and overseas. Now, the company is concentrated in onshore basins in North America, and has diversified away from natural gas.

Devon Energy forecast nearly 60% of its production would come from liquids by year-end, and gave a forecast of oil production growth rates in excess of 20% in coming years.

Investment bank Jefferies was lead financial advisor to Devon Energy in its asset sale to Linn Energy, while Credit Suisse also provided advisory work

Results Still Needed after Turnaround

Earlier in 2014, TheStreet flagged Devon Energy as the type of restructuring driller that might present an opportunity for stock investors. Devon Energy shares were little changed in early Monday trading at $79.50, but shares have gained nearly 30% year to date.

CEO Richels has been a savvy dealmaker when shedding the company's non-core drilling assets, generally achieving higher sale and spinoff values than the market had expected. In spite of good portfolio management, Devon Energy has been plagued by weak operating results.

Those poor operating results would likely prove unsustainable for current management, as TheStreet noted, and might catch the eye of activist investors who have targeted under-performing energy sector players.

In a mid-June initiation, Bank of America Merrill Lynch analysts said that Devon Energy had surpassed expectations with their asset sales and built a liquids backlog that could drive better operational performance. "Following changes in Devon Energy's asset mix in the past year our view is that Devon is undervalued; but the make-up of that value has evolved, with improved transparency on both the absolute dislocation from underlying asset value and the visibility on future growth," Bank of America said in a June 11 initiation of Devon Energy at "outperform" and a $100 price target.

A few weeks earlier, Wells Fargo analysts said they believed Devon Energy would finally hit its energy production growth targets and forecast the company would grow crude production by 25% in 2014, 17% in 2015 and 15% in 2016. That production growth, if Devon achieves it, would translate into one of the highest rates of earnings growth in the industry. Wells Fargo pointed to the GeoSouthern deal as a driver of improving performance.

After closing the deal with GeoSouthern assets in the Eagle Ford on Feb. 28, the pace of production has accelerated from 53 million barrels of oil equivalent a day (MBoe/d) to 64 MBoe/d. That acceleration makes Devon's second half guidance of 80-to-85 MBoe/d achievable, according to Wells Fargo.

On Monday, Wells Fargo analysts reiterated their outperform rating for Devon Energy. Devon Energy shares were little changed at $79.48 on Monday. Shares in the company have gained nearly 30% year-to-date.

With quarterly earnings due on Aug. 6, investors will now likely turn their focus away from M&A and to Devon Energy's operational performance versus.

-- Written by Antoine Gara in New York.

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