Utilizing the Technical Expertise in Barnett to Drive Long Term Growth

Wednesday 8 February 2012, Amsterdam

Utilizing the Technical Expertise in Barnett to Drive Long Term Growth

Devon is one of the earliest movers into Barnett Shale, which entered the play in 2002 when the shale had not seen any major drilling. The company holds a net acreage position of 623,000 net acres in Barnett Shale, holding the largest acreage position in the play. Devon owns an average working interest of 89.0% in Barnett Shale and it was the first player to use horizontal drilling in this shale. Since then, the company has been operating in Barnett Shale and gained significant technical expertise to handle unconventional resources. Devon has been continuously working on improving the fracturing techniques used in the development of unconventional resources.

Devon is working on improving the drilling efficiencies in this shale through pad drilling and by reducing the drilling time (time required to spud a well and release the rig). Consequently, the company has been able to reduce its drilling time from 14.4 days in 2009 to 13.3 days in 2010. It achieved a drilling time of about 12.6 days in early 2011. Reduced drilling time saves on field service costs and results in early production addition. This eventually leads to improved operational economics.

Devon has been able to improve the Estimated Ultimate Recovery (EUR) in Barnett Shale based on improved drilling efficiencies. In 2008, the company estimated the EUR per well of 2.2bcfe for its primary acreage (72% of its total acreage in 2008), 0.9 bcfe for its emerging area (17% of its total acreage in 2008) and 0.7bcfe for speculative areas (11% of its total acreage in 2008). Based on its drilling activities in 2011, Devon expects the average EUR/well to be 3.2bcfe. The company increased its drilling activities in this shale in order to boost its operational growth. This helped the company to continuously add reserves. Devon has continuously been adding organic reserves in Barnett Shale since 2004. The figure below shows the performance revisions in Barnett Shale from 2004–2010.

See figure: Devon Energy Corporation , Barnett Shale Performance Revisions, Bcfe, 2004–2010

 
The company has been able to effectively utilize the resource potential associated with Barnett Shale with more efficient use of its technical expertise. Devon drilled around 5,000 wells in this shale since its entry in the play and increased its net Barnett Shale production from 200MMcf/d in 2002 to 1.3bcfe/d in Q2 2011. It plans to focus on drilling in Barnett Shale to increase production. Devon invested $1.1 billion capex in Barnett Shale in 2010, drilling 460 wells. It plans to maintain the same capex level in the play in 2011 by drilling 375 wells.

The company expects to increase its Barnett Shale production to 1.4bcfe/d by Q1 2013 with the planned expansion of mid-stream facilities. Devon expects inventory of 7,000 undrilled locations and net risk resource potential of around 18 Tcfe in this shale. Considering the company’s current production level and total resource potential associated with this shale, Barnett Shale can support Devon’s organic production growth for many years.

The company has huge resource potential in Barnett Shale which can support its growth trajectory. Devon’s efforts to improve drilling efficiencies based on its technical expertise are expected to develop its operational economics. GlobalData expects Barnett Shale to continue to support Devon’s production growth in the future.