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Devon's Division Merger to Increase Efficiencies, Reduce Staff

Devon Energy plans to combine the company's International and Gulf divisions into a newly formed Offshore division in a cost-cutting move that will also involve a small reduction to its workforce, the largest U.S.-based independent oil and gas producer said late last week.

The company said the move will provide greater focus and efficiency to these areas of operations that have similar scope, technical requirements and strategy. The Offshore division will be headquartered in Houston.

"The decision to combine these two divisions will allow us to better pool our knowledge and resources in offshore exploration and development," said Dave Hager, executive vice president of exploration and production. "We continue to view our deepwater strategy as a means to enhance Devon's long-term growth opportunities."

Noting that the combination would result in some employee cuts, spokesman Chip Minty said that as with most reorganizations, some overlap in expertise is expected to be discovered. "As we reconfigure our organizational chart, we expect to discover places where positions are redundant within those two organizations," he told NGI. "Through this process we will be eliminating no more than 75 positions. Some of those people within those positions will be given opportunities to move to other positions within the company."

With the current credit market tightness, Devon has been looking at different strategies to develop its reserves, including large leaseholds in the Barnett Shale, the Haynesville Shale and the Lower Tertiary in the Gulf of Mexico (see NGI, May 11).

To ensure that it can fund long-term projects in the deepwater GOM, Devon recently said it was looking for a partner to share the costs, which are eating into the company's budget. CEO J. Larry Nichols said earlier this month that the Oklahoma City-based producer is attempting to limit capital allocations to longer-term projects because the amount of capital required in the Lower Tertiary is going to be "significantly large" over the next few years.

Heading up the newly formed Offshore division as senior vice president will be Tony D. Vaughn, who was previously senior vice president of Devon's Gulf division.

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