Devon Energy (NYSE:DVN) has one of the largest positions in the Permian Basin and plans to rapidly develop this acreage over the next five years as the company moves to meet its long-term goal of increasing crude oil and liquids production.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

Permian Basin Summary
Devon has 1.5 million acres under lease in the Permian Basin, with the acreage located in both Texas and New Mexico. The only independent exploration and production company with a larger position is Occidental Petroleum (NYSE:OXY), which has 2.4 million acres under lease.

Devon estimates that it has net risked resources of 2.8 billion barrels of oil equivalent (BOE) in the Permian Basin and more than 8,000 drilling locations on its acreage. The properties produce a mix of different hydrocarbons, and the company reports that approximately 75% of these resources are crude oil and natural gas liquids.

It reported average net production of 53,000 BOE per day from its Permian Basin properties in the fourth quarter of 2011. The company's 2012 development program calls for three additional rigs during the year, bringing the total to 24.

SEE: Oil And Gas Industry Primer

2012 Program
The company has budgeted $1.4 billion in capital for the Permian Basin, with approximately 20% allocated to acquiring more leaseholds. It will spend the balance on the development of existing and emerging plays here. It expects to drill more than 300 wells in the Permian Basin in 2012 and generate liquids production growth of 25% during the year.

EOG Resources (NYSE:EOG) also has a large development program planned for the Permian Basin in 2012. The company has 240,000 net acres and will drill approximately 112 net wells during the year.

SEE: What Determines Oil Prices?

Long-Term Program
Devon is planning an aggressive development program for the Permian Basin over the next five years, and will ramp up its operated rig count accordingly. The company will operate an average of 26 rigs in 2013, and reach 40 operated rigs by 2016.

This level of development is expected to generate compound annual growth rate (CAGR) in production between 20 and 25% through 2016. This growth rate will increase production to approximately 137,000 BOE per day by that year.

It has dozens of formations on its acreage, but plans to focus its development efforts on the Bone Spring, Delaware, Wolfberry, Wolfcamp and Cline Shales.

Other Operators
Concho Resources (NYSE:CXO) is a pure play Permian Basin operator and has more than 500,000 net acres under lease. The company has drilled 190 wells here over the last three years and plans to spend $1.37 billion to drill 390 wells here in 2012.

SEE: A Guide To Investing In Oil Markets

The Bottom Line
Devon Energy has chosen to focus its capital and energy on the Permian Basin as it seeks to increase crude oil and liquids production through 2016. The company's large acreage position here ensures that it will have its choice of locations and formations to drill.

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.

Related Articles
  1. Stock Analysis

    The Biggest Oil Producers in Asia

    Learn which Asian countries deliver the most crude oil to market, and discover what companies are the biggest producers in each country.
  2. Stock Analysis

    The 5 Biggest Russian Oil Companies

    Discover the top Russian oil companies by production volume and find out more about their domestic and international business operations.
  3. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  4. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  5. Stock Analysis

    3 Solar Stocks to Add to Your Portfolio

    Understand the growth and challenges of the renewable energy market and its success in 2015. Learn about the top three energy stocks to add to a portfolio.
  6. Investing News

    Glencore Shares Surge in Hong Kong

    Shares of Glencore International, a leading multinational commodities and mining company, jumped by around 15% on London Stock Exchange, after the shares had gained about 71% earlier on the Hong ...
  7. Stock Analysis

    The 5 Best Buy-and-Hold Energy Stocks

    Understand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
  8. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  9. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  10. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!