Devon Energy (NYSE: DVN) reported fourth-quarter and full-year earnings on Wednesday. Though profits were down, they weren't as terrible as analysts expected them to be, and the stock closed up more than 7% on the day. Below is a closer look at Devon's earnings.

The fourth quarter
Devon's fourth-quarter profit fell 9.8%, despite a production increase of 10%. The increase was predominantly due to natural gas production. Devon's average price of natural gas was $3.16 per 1,000 cubic feet, down from the same period last year.

Luckily, there was also some good news regarding the last three months of the year. Devon brought six wells online in its Granite Wash position, and fourth-quarter production in the play increased 47% over last year. The Granite Wash is mostly an oil and liquids play, and Devon's 19,100 barrels per day production rate bodes well for the future.

For the full year
Liquids, you see, are keeping Devon afloat. The company's sales of oil, gas, and natural gas liquids increased 14% in 2011, but liquids accounted for a whopping 60% of total upstream revenues. As a result, Devon's full-year report was full of good news.

Net earnings for 2011 squeaked out an improvement over last year, coming in at $4.7 billion compared with $4.6 billion in 2010. The company generated a substantial increase in cash flow compared with last year, growing 23% to $6.5 billion. Annual revenue was also up, increasing 15% to $11.5 billion.

The company also announced that it is raising its dividend 18%, from $0.17 to $0.20 per share. The dividend is payable to shareholders on March 30, going ex-dividend on March 15. Devon has an excellent dividend history, increasing its payout seven times for 800% growth.

Foolish takeaway
Devon's shareholders had a wild ride in 2011, as the stock peaked at $93.56 in March, only to plummet to $50.74 by October. Shares are now trading closer to $75.00, up 40% from their October bottom, and the future looks bright.

Devon inked a deal with China's Sinopec (NYSE: SHI) at the beginning of the year 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. This partnership, combined with Devon's excellent liquids portfolio, make it one of the more compelling stocks for 2012.