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With investors bombarded with information on the performance of some of the larger, better-known energy stocks, one has been quietly making headway, leading the pack in some areas of exploration. I'm talking about independent oil and natural gas exploration and production company Devon Energy (DVN).

Devon recently increased its 2012 capital budget from $5.1 billion to $6.4 billion, laying plans to make use of the additional capital for exploration and further oil and gas leasehold acquisitions, and particularly for crude oil in the U.S. The company is aggressive planning to spend $35.4 billion through 2016 toward exploration and production. It is this aggressiveness, along with its willingness to search in areas off the beaten path for oil, that makes me a huge fan of Devon.

With good reason, many energy producers have been targeting the Basin's Wolfcamp formation (shale formation located in the Permian Basin of Texas and New Mexico), drilling the area for decades. However, Devon has chosen to gain access in another region, exploiting the midland section of the Basin in the Cline formation. Planning to drill 15 wells in 2012, the company has been building up a position of nearly 500,000 net acres prospective for the Cline Shale. Devon estimates resources there may total 3.6 billion barrels of oil equivalent.

Other operators in the Cline Shale formation include Energen (EGN), Pioneer Natural Resources (PXD), Berry Petroleum (BRY), Gulfport Energy (GPOR). Another energy company, Range Resources (RRC) recently reported the production results of a well drilled and completed on its 100,000 net acres exposed in this play, resulting in an initial production rate of 600 BOE per day, and an estimated ultimate recovery of 340,000 BOE. Devon's wells in this area are expected to cost $6.5 million each and produce 570 mboe.

Based in Oklahoma City, OK, Devon's oil and gas operations are focused mainly in the U.S. and Canada. The company's midstream assets include nearly 13,000 miles of pipeline, including a 50% ownership stake in Canada's Access Pipeline, as well as 65 natural gas processing and treatment plants concentrated in north Texas at the Barnett Shale field. Its international operations include assets in Azerbaijan, China, Russia and Brazil.

Changing gears and focusing more on oil than on natural gas seems to be the smart play for today's market. During a call to investors in February, Devon's CEO John Richels said, "We're focused on oil opportunities. In 2012, virtually all of our capital will be directed to our oil and liquids-rich project areas." The process of being proactive and changing before forced to change is one of the characteristics that makes Devon such an attractive investment. As early as 2009, the company had announced plans to divest all of its offshore assets located in the Gulf of Mexico and outside North America to strategically focus on highly profitable onshore projects in North American.

As of the end of 2010, it successfully sold all properties in Azerbaijan, China and the Gulf of Mexico, and a year later managed to sell off its Brazilian assets. The sales brought in close to $10 billion, which Devon has used to beef up oil production. The result is that the company's North American onshore production increased 8% from the 2010 levels to 658,000 oil equivalent barrels per day in 2011. In 2011, the company invested $1.5 billion on acreage acquisitions, and its total drill-bit reserve additions during the year surpassed the production rate, with liquids reserve replacement rate at 230%.

Just recently, in January, Devon announced a deal with China's Sinopec Shanghai Petrochemical (SHI) that included $1.6 billion in drilling carry. The agreement extends over five of Devon's positions and will be crucial in the company's goal to keep costs down. The partnership only enhances the company's already beefed up liquids portfolio.

Always thinking ahead is a trait of Devon. The company knows the reputation its industry has with environmentalists and has recently began undertaking some green initiatives. The company has begun employing portable equipment to capture for resale much of the methane that would otherwise escape. This is a step the company is taking before new regulations come out forcing energy businesses to do the same. Also, when mining oil sands in Canada's forests, the process can tear up forests and hurt have a negative impact on the area's wildlife. Devon, along with other companies is helping to develop solvents to use in the process instead of natural gas. These new products are supposed to be less harmful on the environment. When an energy company is seeking to improve the way it works in regards to the environment, while still being extremely productive, it strengthens even more its position in the market.

This company has been getting its act together for some time now and the results are showing. At the end of 2011, Devon had grown its proved reserves to an all-time record of 3.0 billion equivalent barrels (BBoe), adding 386 million Boe through extension and new discoveries. The company's total proved reserves for 2011 included 2.2 BBoe of proved developed reserves, making up 74% of total reserves, and its year-end proved reserves were 10.48 trillion cubic feet of natural gas, 705 million barrels of crude oil, and 552 million barrels of natural gas liquids. The focus to liquid gas is keeping the business in high cotton. The company's sales of oil, gas, and natural gas liquids increased only 14% in 2011, while liquids accounted for 60% of total upstream revenues. Additionally, the latter part of 2011 looked good for Devon because the company brought six wells online in its Granite Wash stake. The production there increased 47% over the previous year, producing 19,100 barrels of oil per day.

Financially, Devon is sitting pretty with net earnings for 2011 coming in higher than its previous year at $4.7 billion compared with $4.6 billion in 2010 and cash is king at the company with cash flow growing 23% to $6.5 billion. Annual revenue increased 15% to $11.5 billion. Devon's quarterly revenues was $2,585 million, ahead of the year-ago quarter revenue of $2,135 million, and the full-year 2011 results came in at $11,454 million.

Devon reported 2011 fourth-quarter adjusted EPS of $1.55 which came above the analysts' estimates of $1.48. For all of 2011, the company posted earnings of $6.14 per share, again ahead of analysts' estimate of $6.05. Another good reason to like Devon is that the company has a great dividend history, increasing its payout seven times for 800% growth. The company recently announced that it is raising its dividend 18%, from $0.17 to $0.20 per share.

With Devon's setting aside of capital money to continually acquire land, its diversified portfolio, focus on oil, healthy balance sheet, and smart management plays make for a good combined package for a long-term energy company.

Source: Devon Energy's New China Deal Will Propel Stock Higher