Devon plans to utilize a floating production, storage and offloading vessel (FPSO) to develop the Cascade project in the Gulf of Mexico. What are the reasons for that decision?

There are several reasons for selecting an FPSO for our first Lower Tertiary development project. One is the lack of oil pipeline infrastructure in the vicinity of Cascade. The Cascade prospect is in more than 8,000 feet of water and 130 miles from shore. Shuttle tankers will transport oil from the Cascade FPSO to Gulf Coast refineries. Using an FPSO with shuttle tankers will also allow us to develop the project more quickly than if we were to design, construct and install more permanent facilities.

Another advantage of an FPSO is scalability. Initially, we plan to drill and produce two wells at Cascade. We will monitor and measure the performance of those initial wells as we learn more about the characteristics of the oil reservoir and optimize the number of wells necessary to fully develop the field. This approach will allow us to proceed at a measured pace and increase the scale of the project as our understanding of the reservoir increases. Additionally, by leasing the FPSO and shuttle tankers we will limit our capital investment in the early stages of the project. Although this will be the first FPSO utilized in U.S. waters, the technology has been extensively tested in offshore basins in other parts of the world. Our partner in Cascade, Petrobras, is a world leader in the use of FPSOs.

Some exploration and production companies have purchased drilling rigs and entered into other non-core businesses. Does Devon plan to do the same?

There has been a tendency in our industry for some competitors to venture into ancillary businesses, such as owning drilling rigs. This has typically been when prices for oil field services, such as drilling, were on the rise. Experience tells us, however, that as the forces of supply and demand for those services adjust, prices come back down. Consequently, the economic advantage of entering a non-core business can disappear abruptly.

Devon is principally an exploration and production company. This means that we search for new oil and natural gas reserves and produce and market those reserves. Although drilling is necessary to our operations, it is not a core business. We hire specialists because that is what they do best. We have no plans to diversify into any oil field service businesses.

Devon has not made a major corporate acquisition since 2003. Why not?

Between 1998 and 2003, Devon completed six progressively larger transactions that totaled more than $22 billion. Why did we stop in 2003? Because reinvestment opportunities within our existing property portfolio were superior to those available through large-scale corporate acquisitions. That does not mean, however, that we abandoned the acquisitions market completely. In 2006, we acquired properties in the Barnett Shale field at a cost of about $2 billion. That transaction enabled us to significantly increase our leadership position in the Barnett Shale.

Today, the investment opportunities we have available through drilling and repurchasing Devon shares continue to be better than the opportunities available through large-scale acquisitions. Will we ever do another corporate acquisition? That is hard to say because economic conditions and opportunities constantly change. But for now, Devon has a strong, growing asset base, with many thousands of potential locations available for drilling. Acquisitions are not necessary for us to enjoy a healthy growth profile.

Why did you decide against forming a publicly-traded master limited partnership?

Devon announced in July 2007 that we planned to form a master limited partnership (MLP) that would own a minority interest in our marketing and midstream business. A stated reason for the planned transaction was to enable the securities markets to place an independent value on Devon's marketing and midstream operations. We believed that this segment of our business, which generated more than $500 million of operating profit for Devon in 2007, was not fully reflected in the price of our common stock.

At the time we announced our plans for an MLP, the market for yield-driven investments was very receptive. During the second half of 2007, world credit markets were beset by a cascade of bad news and the MLP market deteriorated considerably. This led us to withdraw Devon's prospective offering. Whether or not we reconsider forming an MLP will depend largely upon how the market for such investments rebounds in the future.

What led to your decision to divest your operations in Africa?

We reached the decision to exit after evaluating the relative risks and rewards of making further investments in Africa versus competing opportunities. We weighed several factors including geopolitical risks, fiscal terms and proximity to markets. We also found it difficult to secure a competitive advantage over large, national oil companies in acquiring the best exploration opportunities in this part of the world. The national oil companies, often backed by foreign governments, can offer incentives to the host countries that we cannot match.

Ultimately, the decision hinged on the allocation of resources — both capital and people. We concluded that Devon could deploy our resources more efficiently and effectively elsewhere. This includes the Lower Tertiary trend in the Gulf of Mexico, the oil sands in Canada and exploration prospects in Brazil and China.

With many employees in your industry nearing retirement age, what is Devon doing to attract and retain talent?

Hiring and retaining a skilled workforce is, and will continue to be, a challenge to the energy industry as experienced employees retire. Past periods of low commodity prices and underinvestment caused many to leave oil and gas jobs and reduced the number of college students choosing petroleum-related careers. Devon is attempting to reverse this situation in several ways. One is by lending our support to universities that train petroleum professionals. Another is by aggressively recruiting on college campuses and offering attractive internship programs to students pursuing oil and gas careers.

We are also devising compensation and benefit programs with features attractive to both young people entering the workforce and to older, established employees. Devon recently won the attention of the national business press by offering alternative retirement savings plans that address the concerns of employees at all stages of their careers. We are also considering other options that could entice experienced professionals to extend their careers as they transition into retirement. Our goal is for Devon to be among the most desirable employers in our industry. Our recognition in 2008 as one of FORTUNE magazine's "100 Best Companies to Work for" indicates that we are succeeding in that pursuit.