Devon Energy Actively Manages $976M in Debt and Continues Refrac Program
Devon Energy (NYSE: DVN) cut their budget by 75%, forecasting a 10% decline in oil production on a quarter to quarter basis from 2015 to 2016. Devon continues to manage their debt by putting assets up for sale and raising equity to cover the $976 million in debt they have in 2016.
Committed to the Stack in 2016
In 2016 Devon will be running 4 rigs in the Stack with a focus in Meramec. The company is testing down spacing and staggering to increase the number of locations targeting Meramec. Due to capital requirements, Devon is looking at joint development in Meramec and Woodford. Spud to rig release times decreased to 21 days with the efficiency gains translating to a decline of ~20% in well costs to around $6 to $6.5 million per well. DVN expects to spend ~$325 million in the area which is 33% of the company’s budget.
In December Devon announced the acquisition of 80,000 net acres in the Stack which closed on January 7, 2016. With that acquisition the company has put up 80,000 Boe per day of production for sale in the areas of Midland Basin, Mid-Con and East Texas regions, details are shown below:
Strong Well Production Leads Devon Over Peers in the Permian
Devon anticipates spending of ~$ 200 million in the Delaware basin targeting Bone Spring in Eddy and Lea counties. Fourth quarter net production grew by 45% from 2014 to 2015 and LOE is down ~30% from early 2015. In 2015 the company’s 90-day rates were about 50% higher the the industry average of 420 Boepd. DVN credits their optimized completion design and a better technical understanding in the formation. DVN’s typical well completion design uses an average proppant amount of ~5.3 million pounds.
The chart below is showing the OFS relationships that DVN has in the Permian Basin:
Eagle Ford Infill Program to Increase Inventory
Matching the Delaware basin, the Eagle Ford will also have ~$200 million to spend in 2016. Devon’s acreage in the Eagle Ford lies in the core where some of the best returns are seen in North America having ~70,000 net acres focused in Dewitt county. Drilling and completion expectations have been reduced in the Eagle Ford with the expected cost dropping to $6.5 million per well from the peak in 2014 of $9.5 million in Dewitt county. The company is under way on their lateral infill program which has the potential to increaser he number of locations by 200.
Doubles Size of Position in the Rockies
Devon expanded their footprint in the Rockies region with an acquisition that closed in December, adding 230,000 net acres in the Powder River basin, more then doubling their position.
Barnett Refrac Program Exceeding Expectations
In 2015 Devon fast-tracked their horizontal refrac program in the Barnett. The company tested 25 wells, with 19 of them achieving peak 30-day IP rates and an average uplift of about 1.1MMcfe per day. The refracs increased production per well by 340% on average and cost about $1 million per well. DVN will refrac 6 horizontal wells during 2016.
The vertical refrac program restimulated 140 well in 2015 and lowered costs by ~40% with some wells costing less then $250,000 per well. Production uplift of 440 Mcf per day exceeded the type curve expectations by 12%. For more on refracs in the Barnett check out Energent Groups Refrac In-Depth Series which included Devon Energy, Enervest, and other operators.
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