CORPORATESISSUER COMMENT 8 February 2016RATINGSDEVON ENERGY CORPORATION (DVN) Moodys SR Unsecured Rating Baa1Moodys Outlook RURBond-Implied Rating B2CDS-Implied Rating B3EDF-Implied Rating B3As of February 5, 2016ContactsAllerton G. Smith 212-553-4058 Sr Dir-Sr Research Analyst allerton.smith@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operates on an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research,Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products.For further detail, please see the last page.Market Signals ReviewDevon Energy Corp.: Market-Implied Ratings Dive to 10-Year Lows The bond- , EDF'- , and CDS-implied ratings for Devon Energy all weakened recently to their worst levels of the last ten years. The CDS-implied rating just a day ago rose to one notch above its lowest level of the past decade. The sharp decline in global energy prices is weighing heavily on the market signals of energy companies such as Devon Energy.Devons bond-implied rating fluctuated between Baa1 and Baa2 for most of 2015. It has plummeted since late-November 2015 to B2 (Figure 1).The companys EDF'-implied rating is now B3, having dropped by four notches from Ba2 in early-November. It was Ba1 a year ago.Devon Energys CDS-implied rating dipped to Caa1 in early February, its lowest since February 2006. It recovered to B3 as of February 5.FIGURE 1. DEVON ENERGY: MOODYS AND MARKET-IMPLIED RATINGS, LAST 365 DAYS (DAILY DATA)According to our ratings gap-conditioned transition matrices, companies rated Baa1 with a bond-implied rating of B2 outperformed the broad market 63% of the timeMOODY'S ANALYTICS CORPORATES2 8 February 2016 Market Signals Review: Devon Energy Corp.: Market-Implied Ratings Dive to 10-Year Lowsover the following 12 months, matched the markets performance 5% of the time, and underperformed the broad market 32% of the time.Readers will recall that when a market-implied rating falls the underlying securities have underperformed the broad market.1Devon Energys implied-rating...
