Fitch ups Devon Energy view to positive

Fitch Ratings said it affirmed Devon Energy Group Corp.'s BBB issuer default rating, BBB senior unsecured debt rating, BB+ preferred stock rating and F2 commercial paper rating and changed the outlook to positive from stable.

Fitch also affirmed the BBB rating on the notes assumed from the acquisition of the PennzEnergy Co. which are held at the parent level by Devon, and the BBB- rating on the senior unsecured debt assumed in the acquisition of Ocean Energy, which is not explicitly guaranteed by Devon.

The positive outlook reflects the company's discovery of two additional oil wells in the Gulf of Mexico, its robust 194% organic reserve replacement rate in 2005 and Fitch's expectations of another strong organic reserve replacement rate in 2006.

The agency said Devon's ratings continue to be supported by the company's sizable reserve base and production profile, the significant cash generation coming from the company's midstream operations and the efforts to reduce debt in recent years. The company has also suspended the ongoing share repurchase program that began in 2005 until at least later in 2006.

Concerns are primarily focused on Fitch's expectation that the company will pursue more acquisitions or more shareholder-friendly activities.

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