Devon Energy (NYSE: DVN) made a subtle change to its capital return strategy this year. The oil giant had paid out a gusher of dividends over the past couple of years by prioritizing paying variable dividends to return excess cash to shareholders. However, it plans to emphasize repurchasing its shares in 2024.

Fueling the focus on share repurchases is Devon's deep-seated belief that the company's shares, and oil stocks in general, are dirt cheap these days. Here's a look at the factors driving that view.

Devon Energy CEO Rick Muncrief discussed the company's capital return plans on the fourth-quarter conference call. He noted that Devon expects to become much more efficient this year. Falling oilfield service costs and focus on developing its world-class position in the Delaware Basin will enable the company to cut capital expenses by 10%. That positions the company to grow its free cash flow by 20% to $3.2 billion, assuming oil averages around $80 per barrel (slightly above the recent price).

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Source Fool.com