Earnings season is in full gear, and thus far earnings have been strong. However, that doesn't go for companies focused on natural gas. These companies have been struggling to bring in increasing cash flow in the face of lowered revenue from gas sales. While Devon Energy (NYSE: DVN) is a top-five producer of natural gas, it also boasts a rather balanced portfolio that includes natural gas, light oil, heavy oil, and natural-gas liquids. Here's what to watch for when Devon reports.

No. 1: production
In 2011, production averaged 658,000 barrels equivalent per day. That number should increase nicely in 2012. For the first quarter, growth is only expected to clock in at 1.5% year over year, which should make for production of 685,000 to 695,000 barrels equivalent per day. As the year goes on, that number should steadily increase. In fact, as of early April, the company was already producing almost 700,000 barrels per day. At the end of the year, Devon expects to be producing about 710,000 barrels a day.

No. 2: liquids growth
Year-over-year production growth is great, but we want profitable growth. That's no problem for Devon, as the company is held by production on essentially all of its acreage. That means that while other companies are still drilling for natural gas in order to avoid losing their acreage, Devon can instead make capital allocation decisions based on rates of return. Obviously, natural-gas plays are bad places for capital right now. Devon's current rig allocation bears that out.

The company is currently not drilling any dry-gas wells. Devon could easily grow gas production if prices were to improve, but until then it will concentrate on growing its oil and liquids production. In fact, 2012 should see 22% to 24% oil growth and 11% to 13% growth in NGLs. While overall production should grow about 6%, Devon's oil and NGL mix is growing much faster. That's what we want to see in this type of environment.

What's more, Devon's liquids growth comes despite an established base of 250,000 barrels per day of production. For perspective, Chesapeake Energy (NYSE: CHK), one of the best liquids growth stories of the past several years, is attempting to get to 250,000 barrels per day by 2015. Meanwhile, Devon is already there! That's the advantage of maintaining a balanced portfolio over time.

No. 3: increased spending
In addition to its portfolio of developmental drilling opportunities, Devon has a robust pipeline of exploration projects to balance out its portfolio of maturing assets. One of the major exploration projects is the 1.4 million-acre joint venture with China Petrochemical (NYSE: SNP), otherwise known as Sinopec. The pair will drill 125 wells across five different emerging plays for a gross amount of $620 million.

In addition, the company is currently adding to its acreage positions. Having recently reached 500,000 acres in the Cline shale, the company is now attempting to build up to 500,000 acres in another undisclosed light-oil play. The company had not previously included such large leasehold expenditures in its capital spending forecast for 2012, so spending should increase by about $1 billion for the year due to these additions.

Foolish bottom line
Devon is one of the companies I like due to its balanced production mix, its strong balance sheet, and its focus on capital allocation. Because it's held by production on all of its gas properties, the company should be able to focus on growing its high-rate-of-return projects, which should provide profitable growth for the next several years.

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