Thousands of undrilled oil and natural gas locations onshore North America are in development by Devon Energy Corp., and some “new play types” may be unveiled later this year, CEO John Richels said Wednesday.
Richels kicked off the morning presentations on the final day of the Independent Petroleum Association of America’s Oil & Gas Symposium in New York City.
The undrilled locations in the United States and Canada already have been charted but they still are unbooked proven reserves, which will require log tests and further development, Richels told the audience.
“We’ll be doing initial testing of new play types and hopefully we’ll be able to talk about them later this year,” he said.
Meanwhile, the Oklahoma City-based independent continues to balance its once heavily gas-weighted portfolio to extract more of its onshore natural gas liquids (NGL) and crude oil. The major realignment was launched last year.
Devon’s capital spending this year is set at $4.5-4.9 billion, with the bulk of the money (86%) going to development, while the rest is for exploration, Richels explained. The development focus is geared to unearth some of the producer’s proven leaseholds that include Alberta’s oilsands, the Permian Basin and the Rocky Mountains.
At the top of the list for 2011 is Devon’s Jackfish oilsands project in Alberta; Jackfish 2 is scheduled to ramp up production later this year. A Jackfish 3 development also is planned.
Not to be left out is Devon’s heralded Barnett Shale leasehold in North Texas, where the producer has long ruled as the leading producer and leaseholder.
“We have the largest and best position” in the play, Richels noted. Devon initially acquired its Barnett leasehold in 2011 when it paid what today would be considered a bargain price of $3.1 billion for shale pioneer Mitchell Energy & Development Corp. (see Daily GPI, Aug. 15, 2001).
Some producers, he noted, bought into the Barnett “late” and then sold off their leaseholds after failing to achieve Devon-like returns.
“Some people talk about the Barnett in the past tense. A lot got in late, drilled their position and moved on. But we have built significant running room in the play…” with a net risked resource of 18 Tcfe. Devon has about 4,600 producing wells, and it still has an estimated 7,000 drilling locations to go, said the CEO.
Today Devon is producing 1.2 Bcfe/d from the grandfather of the shale plays, and “we plan to keep it at that level. We’re optimizing liquids processing capacity…it’s full now, and we’re still focused on the liquids-rich play.”
Devon drilled 460 wells in the Barnett in 2010; this year, about 325 wells are planned. In total about 800 horizontal wells have been drilled.
What many may not know is that Devon has significant midstream infrastructure in North Texas, with current processing capacity of about 750 MMcf/d. “We have ownership in 3,000 miles [of gathering lines],” Richels noted.
Devon plans to spend about $900 million of its 2011 capital budget on Barnett drilling and midstream operations, and Richels said even at $4/Mcf gas prices, the company will make solid returns.
“Eighty percent of our [total] midstream operating profit comes from the Barnett midstream,” he noted. Combined with drilling and midstream, he said 2011 cash flow from the Barnett business would be about $1.8 billion.
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