Devon Energy (NYSE:DVN) plans to spend tens of billions in capital over the next five years as part of a strategic plan to grow the percentage of crude oil and liquids in its production base. The company will allocate a significant part of those funds to various emerging resource plays in the onshore United States.

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Production Growth
The company reported total production of 240 million barrels of oil equivalent (BOE) in 2011, and estimates that production will reach 340 million BOE in 2016. This represents a compound annual growth rate (CAGR) of approximately 7%.

Its liquids growth rate will be much higher than its overall growth rate, with crude oil production growing at a five year CAGR of 19%. Natural gas liquids production is estimated to grow at a 13% CAGR through 2016.

Devon expects that 52% of its production will be composed of crude oil and natural gas liquids by 2016, up from 35% at the end of 2011.

SEE: Oil And Gas Industry Primer

New Ventures
The company has been leasing acreage and exploring in a number of unconventional oil and gas plays in the U.S. and has classified these into its New Ventures portfolio. These properties comprise 1.4 million net acres and produces crude oil or wet gas. They include the well-known Utica Shale in Ohio, as well as various emerging plays in the Rocky Mountains, Permian Basin and Mid Continent areas.

Mississippian Oil Play
Devon plans to be most active in a Mississippian oil play in Kansas and Oklahoma, where it has 153,000 net acres under lease. The company plans to drill 50 wells in 2011 and 2012 into this play, which produces crude oil with an API gravity ranging from 39 to 42 degrees.

The company has reported that its initial well here produced an average of 590 BOE per day during the first 30 days of production. The company has four other wells being drilled or is undergoing completion operations.

Sandridge Energy (NYSE:SD) is the most active driller in the Mississippian oil play, where the company has more than one million acres under lease. The company plans to drill 380 horizontal wells here in 2012.

Michigan Basin
Another New Venture play that Devon is working on is in the Michigan Basin, where it has 240,000 net acres under lease. The company estimates that it has 1.53 billion BOE in unrisked resources in this play, and plans to drill 15 wells here before the end of 2011.

Devon is one of the few large public oil and gas operators working in the Michigan Basin. EnCana (NYSE:ECA) has 430,000 net acres in this basin and drilled two horizontal wells here in 2011. The company reported a significant liquids component in the production stream with a recent well containing 90 barrels of natural gas liquids for each one million cubic feet of natural gas production.

SEE: What Determines Oil Prices?

Additional Exploration
The company disclosed two additional New Venture plays at a recent analyst meeting held in April 2012. It has leased 500,000 net acres in the Permian Basin that are prospective for the Cline Shale, and plans to drill 15 wells here in 2012.

It also has 250,000 net acres under lease exposed to an undisclosed oil play somewhere in the onshore area. The company is looking to lease an additional 250,000 net acres before disclosing the location of this play. These two New Ventures plays are also not included in the joint venture agreement that Devon Energy signed with Sinopec (NYSE:SNP) in January 2012.

SEE: Oil And Gas Industry Primer

The Bottom Line
Devon Energy has built up an impressive collection of emerging shale and unconventional resource plays across the onshore U.S. and will use these to generate crude oil and liquids production growth over the next five years.

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

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

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