The two presentations Larry Nichols made at the investment conferences held by Howard Weil and the Independent Petroleum Association of America (IPAA) in April couldn't have been more different. At the first session, in New Orleans, the chief executive of Devon Energy spoke about the company's recent financial and operating results, which continue to break records on the heels of the company's many acquisitions made in the past two years. This year Devon will have surplus cash flow of at least $1 billion, much of which will be applied to debt. By year-end, Devon's debt ratio will be between 28% and 34%, he said. But in New York at the IPAA symposium, the audience heard a much different message, as Nichols answered critics who claim the company is underperforming. Wary investors have dragged the stock down such that Devon, usually a market outperformer, has been lagging its peers. Devon's return on capital employed is 12%, right in the middle of a group of six peer companies. "But we rank last among those companies with a 3.6 times multiple and an 8x [price-to-earnings] ratio," Nichols complained. "We have identified three major concerns when talking to investors. They think we are too levered up due to our acquisitions, they think our finding and development (F&D) costs are high, and they question our assets. "Let's look beyond the noise and controversy, to look at the pot of gold at the end of the rainbow." Nichols proceeded to counter each concern. F&D costs seem high due to the purchase of Ocean Energy, with its many deepwater and international assets that are yet to be fully developed. But the huge upfront expenditures have set up the Oklahoma City-based company for reserves and production growth for years to come. "For us to continue spending [at that high F&D rate], we'd have to be stupid or brain-dead. Obviously this is a matter of timing. As we get closer to production we can book those reserves and our F&D costs will come down accordingly." Only 18% of Devon's booked reserves are PUDs (proved undeveloped), the smallest percentage among its peers and the most conservatively booked, Nichols said. Devon has steadily paid down debt since making the string of multibillion-dollar acquisitions of SantaFe Snyder, PennzEnergy, Mitchell Energy, Anderson Exploration and Ocean Energy. Nichols was quick to point out that these deals were made at low points in the gas-price cycle. "Today we have all the technology we need to drill any well anywhere in North America, from the Arctic to deep water. We have more than 25 million net undeveloped acres. We are the largest leaseholder among independents in the deep water and the largest U.S.-based leaseholder in Canada." He added, "We do not need to do an acquisition now, and now is the wrong time, in our view, to do one anyway. It is the right time to be paying down debt." What did investors think? "This presentation was a welcome change, a stirring defense of a company's metrics in answer to critics," said one conference-goer. He added that Devon's financial results, which are usually the staple of investment-conference presenters' PowerPoint slides, can be seen at the company's web site.