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Devon Plans to Keep Midstream, Marketing Assets

Calling its remaining midstream and marketing assets "vital" to Devon Energy Corp.'s exploration and production (E&P) business, investor relations chief Vince White said Thursday that the company has no plans to sell any of them.

White, speaking at the UBS Global Oil & Gas Conference in Austin, TX, also said that the Oklahoma City-based producer does not plan to form a master limited partnership (MLP) with any of its natural gas pipeline, storage and processing assets. Several producers have or are considering MLPs to boost the value of some assets.

"We don't need the cash," said White. And he noted that the company's midstream business "is structured so that it's price sensitive." Sensitivity to commodity prices makes Devon's assets less than ideal for an MLP, which does best under stable cash flows, he said.

Earlier this month, Devon announced that it would receive $2.3 billion -- more than expected -- for all of the noncore U.S. and Canadian properties it put up for sale last year (see NGI, May 9).

Devon Treasurer Jeff Agosta, who joined White at the conference, said the midstream and marketing business improves Devon's E&P business. By itself, the midstream and marketing segment generates between $250-300 million a year in earnings before interest, taxes, depreciation and amortization, which brings another $1.50/boe in profit over most competitors, he said.

Devon expects to generate free cash flow of $1.5 billion in 2005, which the company plans to use to pay down $1 billion in long-term debt. It also will use the cash to fund a 50 million stock repurchase in 3Q-4Q2005.

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