If it’s difficult to remember the last time Devon Energy Corp. made a big acquisition in North America, most energy know-it-alls would be forgiven. The Oklahoma City-based super independent, then living high off the hog from its Barnett Shale winnings, in early 2003 paid $5.3 billion to buy Houston’s Ocean Energy Inc. (see Daily GPI, Feb. 25, 2003).

After selling off international and deepwater interests to give its full attention to North America’s onshore, many are whispering that it’s time for Devon to parlay some of those billions into a big takeover or mega-merger.

But Devon is just fine with the cards it’s holding, CEO John Richels told financial analysts on Wednesday.

“People think we need to do an acquisition to grow. We don’t. We have no interest in acquiring assets,” Richels said in Houston during a morning-long presentation. The management team hasn’t considered making an acquisition “for five minutes.”

The exploration and development plan outlined through 2016 “is based on existing assets,” which at the end of 2011 included on the natural gas side 9.5 Tcf of reserves, according to the latest report by the American Gas Association (AGA) (see related story).

The reserve total puts them in rarified company near the top of the chart after ExxonMobil, Chesapeake Energy, BP and ConocoPhillips. Devon was fifth in production with 740 Bcf after ExxonMobil with 1.6 Tcf, Chesapeake Energy with 1 Tcf, Encana Corp. with 857 Bcf and Anadarko Petroleum with 852 Bcf, according to AGA’s report.

If slow and steady wins the race, Devon surely will be wearing the gold medal. The darling of the big unconventional gas players in the last decade, Devon was the smart one, the company that listened to George Mitchell’s insight into combining horizontal drilling with hydraulic fracturing — and then bought his company for only $3.1 billion in cash and and stock — and then expanded the original Big Daddy Shale, the Barnett, into something that everybody since has attempted to duplicate or better (see Daily GPI, Aug. 15, 2001).

With its focus now trained on North America’s onshore, the management team is confident enough to boost this year’s capital spending budget by $1 billion to $6.3 billion — at a time when other onshore operators are slashing spending.

Nearly all of the new growth will be for exploration — and all will be for liquids and oil. No dry gas drilling will be done until prices cooperate, said Richels.

Compound annual production growth, based on Devon’s current portfolio, is set to grow at a rate of 16-18% between now and 2016. Production is forecast to be up to 340 million boe from the current figure of 255 million boe.

Devon remains a gas-weighted company, but it has a boat-load of properties across the United States and Canada that include a lot of liquids and oil. The 3 billion boe in total proved reserves gives the company “flexibility” in deciding where to drill, exploration chief Dave Hager said.

For instance, in the final quarter of 2011 Devon’s production was weighted 45% to oil, 36% to natural gas liquids and 19% to natural gas. The company now has 16.2 billion boe of risked resource, and 31.8 billion boe of unrisked resource. Of the 16.2 billion boe of risked resources, Devon has more gas (52%), 8.4 billion boe, followed by oil (29%), 4.7 billion boe; and NGLs (19%, 3.1).

“In the last couple of years we have fundamentally changed the focus of the company and we are strictly an onshore North American player,” said Richels. “Today there are tremendous opportunities at Devon.”

By 2016, he said, Devon expects to still be about 48% gas-weighted, but it should be 32% weighted to oil and 20% weighted to NGLs. Within five years the company estimates that it will be producing 905-055 million boe/d, “with more than 50% liquids.”

Devon plans to “organically generate projects,” and become a “first or early mover,” which has often given it low entry costs in acreage and royalty fees. “Scale breeds efficiency,” said the CEO.

“We’ve done a very good job over the years of high-grading the portfolio, taking assets that might have at one point been good and moving them out. We’ve sold about $17 billion of properties over the last 10 years, and we continually try to high-grade the asset base. We try to generally develop a strong midstream presence in key plays…to improve our effectiveness as a company and to give us valuable insights into the markets…”

The company is a lot less flashy than some of its peers in bragging about what it has or doesn’t have, but that doesn’t mean the management team hasn’t been working hard. No, Devon doesn’t have a position in the Marcellus Shale. But don’t let that lack of superstar acreage fool anybody.

Devon remains the leading acreage holder and producer in the Barnett Shale, which, as it turns out, is something of a liquids monster. Long one of the biggest players in the legendary Permian Basin, where producers now are clambering to gain a toehold, Devon recently secured a 500,000 net acre position in the emerging basin’s Cline Shale — making it the biggest leaseholder there.

It’s also got solid holdings in some of the best unconventionals, which include the Utica Shale in Ohio and Michigan, as well as A1 Carbonate holdings in Michigan. Also awaiting development are leaseholds — all mostly held by production — in the Tuscaloosa Marine Shale, Mississippian Lime, Cana Woodford, Granite Wash, Powder River Basin, Washakie, Horn River Basin, Jackfish and Pike.

Devon, noted Richels, also is one of the largest gas gatherers on the continent, with 6,500 miles of pipeline in the United States and around 9,500 miles in Canada, as well as 64 plants in the United States (eight) and Canada (56). The assets enhanced the company’s margins by $2/boe in 2011, the CEO noted.

Another joint venture in the onshore, which would be about half the size of the $2.5 billion deal that Devon completed early this year with China Petroleum & Chemical Corp. — or Sinopec — also is likely in 2013, said Hager (see Daily GPI, Jan. 4).

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