Devon Energy (NYSE:DVN) made steady progress during the first half of 2012 on the company's long-term plan to increase crude oil and liquids production. This company plans to accomplish this through onshore development in the United States and planned expansions of oil sands projects in Canada.

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Strategic Shift
Devon Energy has made a long-term commitment to increase the percentage of crude oil and liquids in its production base, which currently stands at 37%. The company estimates that its development program will cause oil and natural gas liquids production to grow at a compound annual rate between 16 and 18% through 2016.

SEE: A Guide To Investing In Oil Markets

Joint Venture
Devon Energy has assembled large positions in various emerging plays in the United States, but like many other exploration and production companies, was looking for a partner to share the risk and cost of developing these plays. In January 2012, Devon Energy signed an agreement with Sinopec (NYSE:SHI) to jointly develop the Tuscaloosa Marine Shale, Niobrara, Mississippian oil, Utica Shale and the A-1 carbonate play in the Michigan Basin.

Devon Energy is slated to receive $2.5 billion for a 33% interest in the 1.2 million acres under lease that are prospective for these five plays. The deal comes with a drilling carry, in which Sinopec will cover 70% of the joint development costs here, up to a maximum of $1.6 billion.

Devon Energy plans to use this drilling carry to spud 125 gross wells into these emerging plays by the end of 2012. The company is not content with these five plays, however, and disclosed a position in the Permian Basin that is prospective for the Cline Shale. The company plans to drill 15 wells here in 2012.

Another company with exposure to the Cline Shale is Concho Resources (NYSE:CXO), which acquired some of this exposure through the acquisition of Three Rivers Operating Company, a private oil and gas company with substantial acreage in the Permian Basin.

SEE: Analyzing An Acquisition Announcement

Oil Sands
Devon Energy operates two existing oil sands projects in Canada and progressed on the construction of a third project during the first half of 2012. The company began construction of the Jackfish 3 project in January 2012 and is approximately 30% complete with this project. Devon Energy is working on the Pike 1 project in the oil sands and plans to file for approval during the summer of 2012.

Devon Energy expects that these projects, and other planned expansions, will increase the company's thermal oil production at a 17 to 19% compound annual growth rate through 2020, and bring production to between 150,000 and 175,000 barrels of oil per day by that time.

Nexen (NYSE:NXY) is also active in the oil sands and recently announced a better-than-expected production ramp at the Long Lake project. The project is operated and 35% owned by Nexen, with CNOOC (NYSE:CEO) holding 35%.

SEE: Oil And Gas Industry Primer

Dividend Hike
Devon Energy felt comfortable enough with its cash flow in 2012 and announced a dividend increase in the first quarter of 2012. The company hiked its quarterly dividend to 20 cents per share from the previous level of 17 cents per share, bringing the current yield to 1.5%.

The Bottom Line
Devon Energy has assembled an enviable position in the United States and Canada and will leverage these properties to increase production of crude oil and liquids through 2016. The company's operational skill and experience should make investors confident that this goal will be accomplished.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Tickers in this Article: DVN, NXY, SHI, CEO, CXO

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