Overview of Business for Devon

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DVN » Topics » Overview of Business

These excerpts taken from the DVN 10-K filed Feb 27, 2009.

Overview of Business

Devon is one of the world’s leading independent oil and gas exploration and production companies. Our operations are focused primarily in the United States and Canada. However, we also explore for and produce oil and gas in select international areas, including Azerbaijan, Brazil and China. We also own natural gas pipelines and treatment facilities in many of our producing areas, making us one of North America’s larger processors of natural gas liquids.

Our portfolio of oil and gas properties provides stable production and a platform for future growth. Over 90 percent of our production from continuing operations is from North America. Our production mix in 2008 was approximately 65% gas and 35% oil and NGLs such as propane, butane and ethane. We are currently producing 2.6 Bcf of gas each day, or about 3% of all the gas consumed in North America.

In managing our global operations, we have an operating strategy that is focused on creating and increasing value per share. Key elements of this strategy are building oil and gas reserves and production, exercising capital discipline and controlling operating costs. We also use our marketing and midstream operations to improve our overall performance. Finally, we must continually preserve our financial flexibility to achieve sustainable, long-term success.


	•	Reserves and production growth — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions. Additionally, our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we have historically deployed virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. The inverse is also true.

Approximately two-thirds of our planned 2009 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital has been identified for longer-term projects primarily in new unconventional natural gas plays in several United States onshore regions, as well as continued offshore activities in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.


	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant changes in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Marketing & midstream performance improvement — We enhance the value of our oil and gas operations with our marketing and midstream business. By efficiently gathering and processing oil, gas


		and NGL production, our midstream operations contribute to our strategies to grow reserves and production and manage expenditures. Additionally, by effectively marketing our production, we maximize the prices received for our oil, gas and NGL production in relation to market prices. This is important because our profitability is highly dependent on market prices. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we sometimes utilize financial hedging arrangements and fixed-price physical delivery contracts. As of February 16, 2009, approximately 10% of our 2009 gas production is associated with financial price collars or fixed-price contracts.


	•	Financial flexibility preservation — As mentioned, commodity prices have been and will continue to be volatile and will continue to impact our profitability and cash flow. We understand this fact and manage our debt levels accordingly to preserve our liquidity and financial flexibility. We generally operate within the cash flow generated by our operations. However, during periods of low commodity prices, we may use our balance sheet strength to access debt or equity markets, allowing us to preserve our business and maintain momentum until markets recover. When prices improve, we can utilize excess operating cash flow to repay debt and invest in our activities that not only maintain but also increase value per share.

Overview of Business


	•	Reserves and production growth — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions. Additionally, our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we have historically deployed virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. The inverse is also true.


	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant changes in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Marketing & midstream performance improvement — We enhance the value of our oil and gas operations with our marketing and midstream business. By efficiently gathering and processing oil, gas


		and NGL production, our midstream operations contribute to our strategies to grow reserves and production and manage expenditures. Additionally, by effectively marketing our production, we maximize the prices received for our oil, gas and NGL production in relation to market prices. This is important because our profitability is highly dependent on market prices. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we sometimes utilize financial hedging arrangements and fixed-price physical delivery contracts. As of February 16, 2009, approximately 10% of our 2009 gas production is associated with financial price collars or fixed-price contracts.


	•	Financial flexibility preservation — As mentioned, commodity prices have been and will continue to be volatile and will continue to impact our profitability and cash flow. We understand this fact and manage our debt levels accordingly to preserve our liquidity and financial flexibility. We generally operate within the cash flow generated by our operations. However, during periods of low commodity prices, we may use our balance sheet strength to access debt or equity markets, allowing us to preserve our business and maintain momentum until markets recover. When prices improve, we can utilize excess operating cash flow to repay debt and invest in our activities that not only maintain but also increase value per share.

Overview
of Business

Devon is one of the world’s leading independent oil and gas
exploration and production companies. Our operations are focused
primarily in the United States and Canada. However, we also
explore for and produce oil and gas in select international
areas, including Azerbaijan, Brazil and China. We also own
natural gas pipelines and treatment facilities in many of our
producing areas, making us one of North America’s larger
processors of natural gas liquids.

Our portfolio of oil and gas properties provides stable
production and a platform for future growth. Over
90 percent of our production from continuing operations is
from North America. Our production mix in 2008 was approximately
65% gas and 35% oil and NGLs such as propane, butane and ethane.
We are currently producing 2.6 Bcf of gas each day, or
about 3% of all the gas consumed in North America.

In managing our global operations, we have an operating strategy
that is focused on creating and increasing value per share. Key
elements of this strategy are building oil and gas reserves and
production, exercising capital discipline and controlling
operating costs. We also use our marketing and midstream
operations to improve our overall performance. Finally, we must
continually preserve our financial flexibility to achieve
sustainable, long-term success.


	•	Reserves and production growth — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions. Additionally, our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we have historically deployed virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. The inverse is also true.

Approximately two-thirds of our planned 2009 investment in
capital projects is dedicated to a foundation of low-risk
projects primarily in North America. The remainder of our
capital has been identified for longer-term projects primarily
in new unconventional natural gas plays in several United States
onshore regions, as well as continued offshore activities in the
Gulf of Mexico, Brazil and China. By deploying our capital in
this manner, we are able to consistently deliver cost-efficient
drill-bit growth and provide a strong source of cash flow while
balancing short-term and long-term growth targets.


	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant changes in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Marketing & midstream performance improvement — We enhance the value of our oil and gas operations with our marketing and midstream business. By efficiently gathering and processing oil, gas


		and NGL production, our midstream operations contribute to our strategies to grow reserves and production and manage expenditures. Additionally, by effectively marketing our production, we maximize the prices received for our oil, gas and NGL production in relation to market prices. This is important because our profitability is highly dependent on market prices. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we sometimes utilize financial hedging arrangements and fixed-price physical delivery contracts. As of February 16, 2009, approximately 10% of our 2009 gas production is associated with financial price collars or fixed-price contracts.


	•	Financial flexibility preservation — As mentioned, commodity prices have been and will continue to be volatile and will continue to impact our profitability and cash flow. We understand this fact and manage our debt levels accordingly to preserve our liquidity and financial flexibility. We generally operate within the cash flow generated by our operations. However, during periods of low commodity prices, we may use our balance sheet strength to access debt or equity markets, allowing us to preserve our business and maintain momentum until markets recover. When prices improve, we can utilize excess operating cash flow to repay debt and invest in our activities that not only maintain but also increase value per share.

Overview
of Business

Devon is one of the world’s leading independent oil and gas
exploration and production companies. Our operations are focused
primarily in the United States and Canada. However, we also
explore for and produce oil and gas in select international
areas, including Azerbaijan, Brazil and China. We also own
natural gas pipelines and treatment facilities in many of our
producing areas, making us one of North America’s larger
processors of natural gas liquids.

Our portfolio of oil and gas properties provides stable
production and a platform for future growth. Over
90 percent of our production from continuing operations is
from North America. Our production mix in 2008 was approximately
65% gas and 35% oil and NGLs such as propane, butane and ethane.
We are currently producing 2.6 Bcf of gas each day, or
about 3% of all the gas consumed in North America.

In managing our global operations, we have an operating strategy
that is focused on creating and increasing value per share. Key
elements of this strategy are building oil and gas reserves and
production, exercising capital discipline and controlling
operating costs. We also use our marketing and midstream
operations to improve our overall performance. Finally, we must
continually preserve our financial flexibility to achieve
sustainable, long-term success.


	•	Reserves and production growth — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions. Additionally, our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we have historically deployed virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. The inverse is also true.

Approximately two-thirds of our planned 2009 investment in
capital projects is dedicated to a foundation of low-risk
projects primarily in North America. The remainder of our
capital has been identified for longer-term projects primarily
in new unconventional natural gas plays in several United States
onshore regions, as well as continued offshore activities in the
Gulf of Mexico, Brazil and China. By deploying our capital in
this manner, we are able to consistently deliver cost-efficient
drill-bit growth and provide a strong source of cash flow while
balancing short-term and long-term growth targets.


	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant changes in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Marketing & midstream performance improvement — We enhance the value of our oil and gas operations with our marketing and midstream business. By efficiently gathering and processing oil, gas


		and NGL production, our midstream operations contribute to our strategies to grow reserves and production and manage expenditures. Additionally, by effectively marketing our production, we maximize the prices received for our oil, gas and NGL production in relation to market prices. This is important because our profitability is highly dependent on market prices. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we sometimes utilize financial hedging arrangements and fixed-price physical delivery contracts. As of February 16, 2009, approximately 10% of our 2009 gas production is associated with financial price collars or fixed-price contracts.


	•	Financial flexibility preservation — As mentioned, commodity prices have been and will continue to be volatile and will continue to impact our profitability and cash flow. We understand this fact and manage our debt levels accordingly to preserve our liquidity and financial flexibility. We generally operate within the cash flow generated by our operations. However, during periods of low commodity prices, we may use our balance sheet strength to access debt or equity markets, allowing us to preserve our business and maintain momentum until markets recover. When prices improve, we can utilize excess operating cash flow to repay debt and invest in our activities that not only maintain but also increase value per share.

These excerpts taken from the DVN 10-K filed Jun 9, 2008.

Overview of Business

Devon is the largest U.S. based independent oil and gas producer and processor of natural gas and natural gas liquids in North America. Our portfolio of oil and gas properties provides stable production and a platform for future growth. Over 90 percent of our production from continuing operations is from North America. We also operate in selected international areas, including Azerbaijan, Brazil and China. Our production mix in 2007 was 64 percent natural gas and 36 percent oil and NGLs such as propane, butane and ethane. We are currently producing 2.4 Bcf of natural gas each day, or about 3 percent of all the gas consumed in North America.

In managing our global operations, we have an operating strategy that is focused on creating and increasing value per share. Key elements of this strategy are replacing oil and gas reserves, growing production and exercising capital discipline. We must also control operating costs and manage commodity pricing risks to achieve long-term success.


	•	Oil and gas reserve replacement — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions.

	•	Production growth — Our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we deploy virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. Approximately 83% of our planned 2008 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital is invested in high-impact projects primarily in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.

	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant increases in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Commodity pricing risks — Our profitability is highly dependent on the prices of oil, natural gas and NGLs. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we will sometimes utilize financial hedging arrangements and fixed-price contracts. During 2007, approximately 5% of our gas production was subject to financial collar and swap contracts or fixed-price physical delivery contracts. Based on contracts in place as of February 15, 2008, during 2008 approximately 64% of our gas production and 12% of our oil production will be subject to financial collar and swap contracts or fixed-price physical delivery contracts.

Overview
of Business

Devon is the largest U.S. based independent oil and gas
producer and processor of natural gas and natural gas liquids in
North America. Our portfolio of oil and gas properties provides
stable production and a platform for future growth. Over
90 percent of our production from continuing operations is
from North America. We also operate in selected international
areas, including Azerbaijan, Brazil and China. Our production
mix in 2007 was 64 percent natural gas and 36 percent
oil and NGLs such as propane, butane and ethane. We are
currently producing 2.4 Bcf of natural gas each day, or
about 3 percent of all the gas consumed in North America.

In managing our global operations, we have an operating strategy
that is focused on creating and increasing value per share. Key
elements of this strategy are replacing oil and gas reserves,
growing production and exercising capital discipline. We must
also control operating costs and manage commodity pricing risks
to achieve long-term success.


	•	Oil and gas reserve replacement — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions.

	•	Production growth — Our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we deploy virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. Approximately 83% of our planned 2008 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital is invested in high-impact projects primarily in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.

	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant increases in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Commodity pricing risks — Our profitability is highly dependent on the prices of oil, natural gas and NGLs. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we will sometimes utilize financial hedging arrangements and fixed-price contracts. During 2007, approximately 5% of our gas production was subject to financial collar and swap contracts or fixed-price physical delivery contracts. Based on contracts in place as of February 15, 2008, during 2008 approximately 64% of our gas production and 12% of our oil production will be subject to financial collar and swap contracts or fixed-price physical delivery contracts.

These excerpts taken from the DVN 10-K filed Feb 28, 2008.

Overview of Business


	•	Oil and gas reserve replacement — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions.

	•	Production growth — Our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we deploy virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. Approximately 83% of our planned 2008 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital is invested in high-impact projects primarily in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.

	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant increases in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Commodity pricing risks — Our profitability is highly dependent on the prices of oil, natural gas and NGLs. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we will sometimes utilize financial hedging arrangements and fixed-price contracts. During 2007, approximately 5% of our gas production was subject to financial collar and swap contracts or fixed-price physical delivery contracts. Based on contracts in place as of February 15, 2008, during 2008 approximately 64% of our gas production and 12% of our oil production will be subject to financial collar and swap contracts or fixed-price physical delivery contracts.

Overview
of Business

Devon is the largest U.S. based independent oil and gas
producer and processor of natural gas and natural gas liquids in
North America. Our portfolio of oil and gas properties provides
stable production and a platform for future growth. Over
90 percent of our production from continuing operations is
from North America. We also operate in selected international
areas, including Azerbaijan, Brazil and China. Our production
mix in 2007 was 64 percent natural gas and 36 percent
oil and NGLs such as propane, butane and ethane. We are
currently producing 2.4 Bcf of natural gas each day, or
about 3 percent of all the gas consumed in North America.

In managing our global operations, we have an operating strategy
that is focused on creating and increasing value per share. Key
elements of this strategy are replacing oil and gas reserves,
growing production and exercising capital discipline. We must
also control operating costs and manage commodity pricing risks
to achieve long-term success.


	•	Oil and gas reserve replacement — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant assets, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace quantities produced with additional reserves from successful exploration and development activities or property acquisitions.

	•	Production growth — Our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted. As a result, we constantly drill for and develop reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.

	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. As a result, we deploy virtually all our available cash flow into capital projects. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. Approximately 83% of our planned 2008 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital is invested in high-impact projects primarily in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.

	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected by significant increases in commodity prices. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to help manage our operating costs.

	•	Commodity pricing risks — Our profitability is highly dependent on the prices of oil, natural gas and NGLs. These prices are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility, we will sometimes utilize financial hedging arrangements and fixed-price contracts. During 2007, approximately 5% of our gas production was subject to financial collar and swap contracts or fixed-price physical delivery contracts. Based on contracts in place as of February 15, 2008, during 2008 approximately 64% of our gas production and 12% of our oil production will be subject to financial collar and swap contracts or fixed-price physical delivery contracts.

This excerpt taken from the DVN 10-K filed Feb 28, 2007.

Overview of Business

Devon is one of the largest U.S. based independent oil and gas producers and processors of natural gas and natural gas liquids in North America. Our portfolio of oil and gas properties provides stable production and a platform for future growth. About 90 percent of our production is from North America. We also operate in selected international areas, including Azerbaijan, Brazil and China. Our production mix is about 65 percent natural gas and 35 percent oil and natural gas liquids such as propane, butane and ethane. We are currently producing about 2.3 billion cubic feet of natural gas each day, or about 3 percent of all the gas consumed in North America.


	•	Oil and gas reserve replacement — Our financial condition and profitability are significantly affected by the amount of proved reserves we own. Oil and gas properties are our most significant asset, and the reserves that relate to such properties are key to our future success. To increase our proved reserves, we must replace reserves that have been produced with additional reserves from successful exploration and development activities or property acquisitions.

	•	Production growth — Our profitability and operating cash flows are largely dependent on the amount of oil, gas and NGLs we produce. Furthermore, growing production from existing properties is difficult because the rate of production from oil and gas properties generally declines as reserves are depleted.


		As a result, we constantly drill for new proved reserves and develop proved undeveloped reserves on properties that provide a balance of near-term and long-term production. In addition, we may acquire properties with proved reserves that we can develop and subsequently produce to help us meet our production goals.


	•	Capital investment discipline — Effectively deploying our resources into capital projects is key to maintaining and growing future production and oil and gas reserves. Therefore, maintaining a disciplined approach to investing in capital projects is important to our profitability and financial condition. Also, our ability to control capital expenditures can be affected by changes in commodity prices. During times of high commodity prices, drilling and related costs often escalate due to the effects of supply versus demand economics. Approximately 82% of our planned 2007 investment in capital projects is dedicated to a foundation of low-risk projects primarily in North America. The remainder of our capital is invested in high-impact projects primarily in the Gulf of Mexico, Brazil and China. By deploying our capital in this manner, we are able to consistently deliver cost-efficient drill-bit growth and provide a strong source of cash flow while balancing short-term and long-term growth targets.

	•	Operating cost controls — To maintain our competitive position, we must control our lease operating costs and other production costs. As reservoirs are depleted and production rates decline, per unit production costs will generally increase and affect our profitability and operating cash flows. Similar to capital expenditures, our ability to control operating costs can be affected when commodity prices rise significantly. Our base North American production is focused in core areas of our operations where we can achieve economies of scale to assist our management of operating costs.

	•	Commodity pricing risks — Our profitability is highly dependent on the prices of oil, natural gas and NGLs. Prices for oil, gas and NGLs are determined primarily by market conditions. Market conditions for these products have been, and will continue to be, influenced by regional and worldwide economic activity, weather and other factors that are beyond our control. To manage this volatility in the past, we have utilized financial hedging arrangements and fixed-price contracts on a portion of our production and may use such instruments in the future.

EXCERPTS ON THIS PAGE:

10-K (4 sections)	Feb 27, 2009

10-K (2 sections)	Jun 9, 2008

10-K (2 sections)	Feb 28, 2008

10-K	Feb 28, 2007

"Overview of Business" elsewhere:

Enterprise Products Partners L.P. (EPD)

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Devon Energy (DVN)

DVN » Topics » Overview of Business

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