Devon Energy Corp., the largest U.S.-based independent, is forecasting production will grow in 2004 by 4-6%, even though it has put its prolific Cherokee coalbed methane (CBM) field up for sale. The Oklahoma City-based producer, one of the most active in CBM, said the Arkoma Basin field, which holds an estimated 22 MMboe in reserves, is no longer considered a core asset because of recent acquisitions.

CEO Larry Nichols told analysts in New York City that Devon was “constantly evaluating” its assets, and said the 379,000-net-acre Cherokee field was “very labor intensive, and we felt we could better use those people elsewhere.” The field, which held an estimated 22.8 MMboe at the end of 2002, comprises less than 1% of Devon’s 2.2 billion boe in total proved reserves. Some of the Cherokee CBM assets will be kept, but no estimate on how many was provided.

Petroleum Place Energy Advisors has been hired to help with the sale, but Devon officials did not estimate what the field was worth.

“We’re confident we can get out more [value] than we put in,” said Mike Lacey, who directs Devon’s exploration and production. “I can assure you there is a lot of industry interest.”

Minus the Cherokee field, Devon still would hold more than 700,000 net acres of CBM holdings in western Canada, Wyoming, New Mexico and Louisiana, with average net daily production of 127 MMcf.

Devon also plans to increase exploration and production spending by about $300 million to $2.4 billion this year because of an increase in drilling activity anticipated toward the end of the year.

Just a month ago Devon forecast production this year to range between 224-259 MMboe, and Nichols affirmed production would be 246 MMboe. In 2004, however, production is forecast to reach between 256-261 MMboe, driven solely by existing assets. Devon merged with Ocean Energy last year, which is fueling much of the growth, and most of the production increase is from its prolific Barnett Shale fields in Texas, offshore Gulf of Mexico fields and its more conventional North American assets.

Devon expects $1.8 billion to $2 billion of cash flow in the second half of 2003, which is similar to the first six months, based on natural gas prices averaging $5/Mcf and oil averaging $30/bbl. With that forecast, the company would be on track to generate enough cash to fund $2.7 billion of capital expenses and have about $1 billion for debt reduction. Nichols said Devon would reduce its debts to less than 40% of total capital by the end of the year, compared with 64% at the end of 2001.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.