Devon Energy (NYSE:DVN) continued to exploit the company's core holdings in the Barnett Shale as well as several other onshore oil and gas plays during the second quarter of 2011. The company also highlighted the large amount of leasehold that the company has built up in various new onshore plays that are prospective for oil and liquids.
TUTORIAL: The Industry Handbook: The Oil Services Industry

Barnett Shale
Devon Energy is the largest operator in the Barnett Shale, and was the first to use horizontal drilling and hydraulic fracturing on a mass scale to develop the natural gas resources here. Although some consider the Barnett Shale to be mature and in a decline, the company continues to develop this play and has seen some highly productive wells in 2011.

Devon Energy reported production of 1.28 billion cubic feet of natural gas equivalent per day from the Barnett Shale during the second quarter of 2011, representing 13% growth over last year's second quarter

While Devon Energy is now active in many other onshore plays, this core area still accounted for 32% of the company's production in the second quarter of 2011. The company plans to drill 375 wells in the Barnett Shale in 2011. (For related reading on oil, see Peak Oil: What To Do When The Wells Run Dry.)

Quicksilver Resources (NYSE:KWK) has operations in the Barnett Shale and reported 2.6 Tcfe of proved reserves here at the end of 2010.

Permian Basin
Devon Energy is increasing development in various areas as the company looks to increase oil and liquids production. The company has approximately one million acres of leasehold in the Permian Basin in Texas and New Mexico, and reported production of 49,000 barrels of oil equivalent (BOE) per day from here during the most recent quarter.

Devon Energy is working on a number of different plays, including the Avalon Shale, Bone Spring, Wolfcamp and the Wolfberry. The company recently reported some successful wells into the Bone Spring formation with initial production rates averaging 700 BOE per day.

Devon Energy has a large investment in the Permian Basin and will operate 19 rigs here in 2011 with plans to drill approximately 300 wells.

Another operator that is working in the Bone Spring is Concho Resources (NYSE:CXO), which has 160,000 net acres under lease here. The company reported production of 5,600 BOE per day from the Bone Spring in the second quarter of 2011.

Other Liquid Plays
Devon Energy has several other areas under development that have a high content of oil and liquid hydrocarbons. The company has 243,000 net acres under lease in the Cana Woodford Shale play and grew production here 80% over last year.

The Granite Wash is another area that Devon Energy is working on in 2011. The company brought eight wells onto production in 2011, and plans to drill 55 wells here during the year.

Newer Plays
Devon Energy has been leasing acreage in a number of emerging shale and unconventional resource plays over the last few years and has more than one million acres. These resource plays include the Tuscaloosa Marine Shale, Niobrara Shale, Mississippi Lime, and the Utica Shale in Ohio and Michigan. Devon Energy plans to start testing some of these areas and will drill at least 30 exploratory wells to these formations in 2011.

EnCana (NYSE:ECA) has leased approximately 250,000 acres prospective for the Tuscaloosa Marine Shale and will start drilling its first horizontal well in August 2011.

The Bottom Line
Devon Energy has received nearly all the proceeds from the sale of the company's offshore and international oil and gas properties and is now aggressively redeploying these funds into the Barnett Shale and a number of existing and prospective offshore plays. This intense focus on North America should make the company an even more effective operator than in the past. (For related reading, see Unearth Profits In Oil Exploration And Production.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  2. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  3. Stock Analysis

    Analyzing Dish Network's Return on Equity (ROE) (DISH, TWC)

    Analyze Dish Network's return on equity (ROE), understand why it has vacillated so greatly in recent years and learn what factors are influencing it.
  4. Investing Basics

    The Importance of Commodity Pricing in Understanding Inflation

    Commodity prices are believed to be a leading indicator of inflation, but does it always hold?
  5. Fundamental Analysis

    5 Must-Have Metrics For Value Investors

    Focusing on certain fundamental metrics is the best way for value investors to cash in gains. Here are the most important metrics to know.
  6. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  7. Fundamental Analysis

    4 Predictions for Oil in 2016

    Learn four predictions for oil markets in 2016 including where prices are heading and the key fundamental factors driving the market.
  8. Fundamental Analysis

    Performance Review: Commodities in 2015

    Learn how commodities took a big hit in 2015 with a huge variance in performances. Discover how the major commodities performed over the year.
  9. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  10. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  1. When does a growth stock turn into a value opportunity?

    A growth stock turns into a value opportunity when it trades at a reasonable multiple of the company's earnings per share ... Read Full Answer >>
  2. What is the formula for calculating EBITDA?

    When analyzing financial fitness, corporate accountants and investors alike closely examine a company's financial statements ... Read Full Answer >>
  3. How do I calculate the P/E ratio of a company?

    The price-earnings ratio (P/E ratio) is a valuation measure that compares the level of stock prices to the level of corporate ... Read Full Answer >>
  4. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors insight into how efficiently a company (or more specifically, its ... Read Full Answer >>
  5. How do you calculate working capital?

    Working capital represents the difference between a firm’s current assets and current liabilities. The challenge can be determining ... Read Full Answer >>
  6. What is the formula for calculating the current ratio?

    The current ratio is a financial ratio that investors and analysts use to examine the liquidity of a company and its ability ... Read Full Answer >>
Trading Center