Devon Success Strategy Not Tied to Market
Danker, Jessica, THE JOURNAL RECORD
Trying to keep operating costs down is something most companies have in common, however, techniques and discipline to accomplish that are harder to do, said J. Larry Nichols, president and chief executive officer of Devon Energy Corp.
"It's easy to make resolutions and know what you should do," Nichols said. "It is somewhat more difficult to actually do it."
In today's energy industry, companies do not want to get into a position where market is the sole factor in determining their success, according to Devon officials.
Devon is an Oklahoma City-based independent energy company engaged in oil and gas property acquisition, exploration and production and oil and natural gas remarketing.
"We've set ourselves up to succeed regardless of price," said H. Allen Turner, vice president of corporate development.
Nichols said Devon can benefit under both high and low prices because "we keep our financial statements efficiently clean. . .not highly leveraged."
"We have the ability to shift back and forth between drilling and acquisition," Nichols said. "If prices are low, that puts pressure on highly leveraged companies to do something. High prices help us as they do everyone else by increasing revenue and giving us more attractive drilling opportunities."
Devon has just experienced "its best year in history" in which the company set records for production, revenues, earnings and stockholders' equity.
The company reported a 40 percent increase in net earnings for 1993 to $20.5 million from $14.6 million. Revenues increased to $98.8 million from $71.6 million the previous year due primarily to increased production. In 1993, Devon set its sixth consecutive production record to 52.1 equivalent billion cubic feet. That was a 38 percent increase from the previous year.
Since 1987, the company has increased its number of employees to 200 from 125.
According to Devon officials, keeping low cost reserves and concentrating on centralized basins gives Devon the ability to grow in the future.
Nichols said the company regularly examines its portfolio of oil and gas properties and disposes of those that are no longer significant.
"As bigger properties become more successful, we sell off our interest in minor properties," Turner said.
Devon disposed of 2,000 wells during 1993. From 1989-1992, the company disposed of 2,700 wells.
"In contrast, you can still find major oil companies that are sitting on fairly marginal properties just because of some emotional attachment that someone in the hierarchy has because he discovered that field decades ago," Nichols said.
"We try to eliminate properties not critical to our central areas of operations. …