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Oklahoma-based Devon Energy (DVN) is the only U.S. independent energy company with active Canadian Oil Sands operations. On December 5, the company announced that it has received regulatory approval to proceed with the construction of its third Jackfish project in the Canadian Oil Sands region. Jackfish 1 and Jackfish 2, both Steam Assisted Drainage plants named after a native American word for two nearby lakes, are each capable of producing 35,000 barrels of oil per day and each represents around "300 million barrels of gross recoverable oil" according to Business Wire. Jackfish 3 reportedly holds around the same amount of oil as its predecessors and is capable of producing around the same amount per day as the first two Jackfish projects. These projects reflect the company's focus on high growth onshore operations and should propel the company's shares significantly higher over the next few years.

Devon is a leader in the Steam Assisted Drainage recovery method. What is remarkable about Devon's Jackfish operations is that no fresh water is utilized in the process at all, making the projects both efficient and environmentally friendly. Saline water (which is undrinkable) from an underground aquifer is heated to produce steam, which is then injected through a well into bitumen, separating the heavy oil from the sand around it. The heated oil drains into a well below the injection site and the oil and steam are returned to the central processing plant where a series of filtration methods separates the oil from the water and filters the recycled water until its oil content is less than 1ppm. Once oil-free, the water is mixed with saline and reused to make more steam, and the process begins anew. According to Devon's website, "of the 120,000 barrels of saline water that circulate at Jackfish [1] each day, fewer than 1,500 become wastewater."

The Jackfish sites aren't Devon's only projects in the Canadian Oil Sands. Devon also owns a 50% interest in the Kirby-Pike oil sands, which are located right next to Devon's existing operations in the region. The Pike project is a joint venture with BP and will be operated by Devon. The Jackfish projects and the Pike projects should combine to "drive the company's net thermal oil production...to between 150,000 and 175,000 barrels per day by 2020...represent[ing] a 17 to 19 compound annual growth rate" from current levels.

Recently, the White House blocked a proposed 1,700 mile pipeline (dubbed 'Keystone') which would deliver oil from the Canadian Oil Sands to Texas refineries. The current administration and environmentalists claim the pipeline would represent a commitment to nonrenewable energy. Additionally, opponents claim the pipeline represents a real risk to the environment because it would carry oil through areas in the U.S. that could be devastated should a spill occur.

Nonetheless, some members of Congress are already seeking to override the White House's decision. According to an article in the Wall Street Journal entitled "An Inevitable Keystone Pipeline Project," many see the construction of the Keystone Pipeline as inevitable. If the U.S. wants to break its reliance on oil from countries like Saudi Arabia, it will need to create effective partnerships with its friendly neighbor Canada. If it does not, the oil from the Canadian Oil Sands could end up being piped to British Columbia and shipped to Asia. Devon's CEO is confident that the oil will find its way to market one way or another, noting that no matter the administrations decision, Canadian oil will get refined, produced, and consumed somewhere.

Devon of course, is also a large producer of natural gas. The company accounts for over 20% of the total daily natural gas production in the Barnett Shale region, the largest natural gas field in Texas. Devon produces around 1.2 billion cubic feet of natural gas equivalent per day in the region. Devon utilizes 'fracturing' technology to release the natural gas trapped inside the shale. Fracturing involves injecting the shale with water and sand, artificially creating porosity. In its stock report on Devon, S&P notes that the cash flow produced by the Barnett Shale will help Devon finance future projects such as Jackfish 3.

Earlier this year, the company "completed a series of asset sales as part of a plan to reposition itself as a high-growth onshore company." Devon used the 8 billion in proceeds to pay down debt and repurchase shares. For its part, S&P sees the repositioning as a positive for the company and notes that the company's shares do not reflect the increase in growth potential occasioned by the asset sales.

When compared with a peer group that includes heavyweights Apache (APA) and Anadarko (APC), Devon stands out in nearly every category. Its net profit margin is 19% compared with peers' 4%. The company's trailing twelve month price-to-sales, price-to-tangible book, and price-to-cash flow are 2.4, 1.7, and 6.2 respectively compared with peers' numbers of 2.7, 2.2, and 14. Devon's return on equity is nearly 5 times that of its peers (10.44% compared with 2.59%) and its dividend growth is three times the industry average. On top of this, the company has beaten analysts' earnings expectations in 5 of the last 7 quarters. Devon trades for just 9.6 times S&P's estimate of 2012 earnings.

For investors seeking a long-term play on oil and natural gas, Devon is a best-of-breed company. Now seems as good a time as any to begin building a position as the shares still trade near their 52-week low.

Source: Devon Shares To Benefit From Asset Sales, Canadian Oil Sands Projects