Devon Energy (DVN -0.17%) has been an active acquirer over the years, spending billions of dollars on shale assets, which have grown it into one of the largest oil and gas producers in the country. However, while these transactions have increased the size of the company, they haven't created any value for shareholders. In fact, the stock is down about 75% since peaking nearly a decade ago.

It's a trend the company wants to reverse in the coming years by shrinking down to just three core regions, which are where Devon believes it can create the most value for investors going forward.

An oil pump with the sun bursting behind it.

Image source: Getty Images.

Building a shale-focused giant

Devon Energy began its foray into shale back in 2001 when it spent $3.1 billion to acquire fracking pioneer Mitchell Energy, which discovered how to unlock the treasure trove of natural gas locked away in the Barnett Shale. The company would go on to expand its shale portfolio over the years, including spending $6 billion to purchase GeoSouthern Energy for its Eagle Ford position in 2013 and $1.9 billion to buy Felix Energy for its STACK position at the end of 2015.

That last deal, however, which also coincided with a $600 million land acquisition in the Powder River Basin, turned out to be the one that broke the proverbial camel's back. While the purchases provided the company with leading acreage positions in those two high-growth areas, they also saddled it with more debt at a time when oil prices were in free fall. While the company said it would sell $2 billion to $3 billion in assets to shore up its financial position, that wasn't enough to sooth the market's concerns. Because oil continued plunging, Devon Energy had to quickly sell stock and slash spending -- including its dividend -- to bolster its balance sheet.

Oil pumps working the the background near a drilling rig at dusk.

Image source: Getty Images.

Shifting focus

Those moves bought the company some time to sell assets. By the end of 2016, it more than met its goal after unloading $3.2 billion in oil and gas properties as well as a pipeline in Canada. The company continued paring back its portfolio last year, aiming to jettison another $1 billion of non-core oil and gas properties, which it reached earlier this year when it sold a portion of its legacy Barnett Shale assets for $553 million.

However, Devon Energy isn't finished selling assets. Instead, it's "working on [a] portfolio simplification of significant scale," according to CEO Dave Hager. It aims to sell up to $5 billion in additional properties and streamline its focus on the STACK, Powder River Basin, and Permian Basin.

This focus suggests the company will eventually part with the rest of its assets in both the Eagle Ford and Barnett shale regions as well as its oil sands properties in Canada. The Eagle Ford Shale could be the next one to go considering that its joint venture partner, global resources giant BHP Billiton (BHP 1.50%), is looking to exit its shale business altogether. Because of that, it's possible that Devon Energy will agree to sell its stake to the same buyer that ultimately acquires BHP Billiton's position so that it can have full control over that asset.

The reason Devon wants to sell these assets is so that the three regions where it earns the highest returns have its full attention. That focus should enable the company to steadily improve margins, boosting both earnings and cash flow. It should also give the company more money to return to investors above the $1 billion stock buyback and 33% dividend increase already announced this year. This plan aims to grow the value of the company, not necessarily its overall size.

Growing what matters most

Devon Energy spent billions of dollars to expand in recent years. That approach, however, had the opposite impact on shareholder value, which declined as the company increased its size. Because of that, Devon is going to continue shrinking its portfolio in the near-term, so it can focus all its attention on drilling the highest value wells, which should create the most wealth for investors in the coming years. It's one of the many reasons why Devon looks like such a compelling oil stock to buy these days