Of 22 U.S. oil and gas basins from which Devon Energy Corp. produces, some 13 account for less than 5% of company output, according to a study by Ben Dell, senior analyst with Bernstein Research.

“Interestingly, while having production in a greater number of basins boosts growth, if those basins account for less than 5% of the company's gas they actually appear to become a drag. This suggests that, while over time E&Ps must explore new basins to increase production, being too spread out does not help,” he reports.

Dell reviewed several independent producers’ results in 44 U.S. basins to consider whether asset concentration helps or hurts.

Of the producers reviewed, “notably, EOG Resources is absent from this list, since it is not the basin-master in any of its plays--Devon still dominates the Barnett. Newfield Exploration and Murphy Oil are also missing, but this is less surprising given that those companies are considerably smaller.”

He reports that there are “advantages and disadvantages for an E&P to produce from more basins. Concentrated production seems to lower costs, but more dispersed production helps growth prospects. However, being overly dispersed in small basins can be a drag.”

Shining in the study is XTO Energy Inc., which is “well positioned for growth and low costs, with many basins speeding up growth and costs that are even lower than its large concentrated base would imply.”

His top E&P stock picks are XTO, Anadarko Petroleum, Apache Corp., Newfield and Talisman Energy.

–Nissa Darbonne, Executive Editor, Oil and Gas Investor, A&D Watch, OilandGasInvestor.com; ndarbonne@hartenergy.com