Devon Energy expects mergers among mid-size rivals

SAN FRANCISCO, Oct 8 (Reuters) - Devon Energy Corp's (DVN.N) president expects the current credit squeeze will force many mid-size players in the oil and gas industry who are short of cash to merge in order to fund their operations.

"You're going to see a lot of consolidation among the intermediate group, mid-size companies that will see an advantage in becoming larger size and having a larger scale and being able to take advantage of some of the economies of scale," Devon President John Richels told investors at the 2008 Oil & Gas Investment Symposium in San Francisco on Wednesday.

"A lot of people put together some pretty exciting and highly prospective assets and there is going to be a squeeze on their ability to be able to develop that," he added. "The likelihood of consolidation is going to be higher in the next few years than it has been."

He said Devon, however, would most likely continue to buy land in areas where it already has a dominant position.

The credit squeeze meant companies would have to start living within their cash flow, meaning there would be more cuts to capital expenditure budgets ahead, he said.

"In the past you could always sort of squeeze up to the top of the your line and know that you could go out another line tomorrow if you need it," Richels said. "I don't think that's the case any more." (Reporting by Braden Reddall; Editing by Andre Grenon)