Larry Nichols won't blink when U.S. natural gas prices dip below $5 per thousand cubic feet (Mcf). "It's a phenomenon we will ignore because it will right itself quickly," says the chairman and chief executive of North America's No. 4 natural gas producer, Devon Energy Corp. Nichols spoke to fellow producers at an energy forum in Houston recently. He concedes that gas prices could fall below $5 per Mcf but there are myriad reasons why he is convinced it wouldn't last. The most important is the average annual North American gas-production decline rate. He puts this at nearly 30%. "It is difficult for us to see gas below $5 for any sustained period of time," he said. "At under $5, drilling drops dramatically; under $4, the brakes are on." Reduced drilling lets the decline rate take over, supply declines significantly while demand is unchanged or growing, and prices improve. As for new U.S. gas supply from the Mackenzie Delta, he expects the gas won't make its way into the U.S. Instead, it will be used in heavy-oil projects in western Canada. The company is the No. 4 North American gas producer behind BP, EnCana Corp. and ExxonMobil, and ahead of ConocoPhillips, Shell and ChevronTexaco. Without focusing on oil, it is the No. 7 North American oil producer. In 2001, Devon purchased Mitchell Energy & Development Corp., gaining a leading interest in the Barnett Shale that has become the No. 1 gas-producing field in Texas. He had looked at buying Mitchell Energy in 1999 and "we turned our noses up because we didn't think [the Barnett] would work," he says. Two years later, Nichols made an offer and an apology to George Mitchell, the company's founder and chairman. Devon will spend $360 million in the Barnett this year on more than 300 wells. Its company-wide 2005 drilling plan is for 2,200 wells, mostly in North America. (For more on the Barnett Shale, see "Barnett Wonderland" in this issue.)