Devon Energy (NYSE:DVN) continued to exploit the company's core holdings in the Barnett Shale as well as several other onshore oil and gas plays during the second quarter of 2011. The company also highlighted the large amount of leasehold that the company has built up in various new onshore plays that are prospective for oil and liquids.
TUTORIAL: The Industry Handbook: The Oil Services Industry
Devon Energy is the largest operator in the Barnett Shale, and was the first to use horizontal drilling and hydraulic fracturing on a mass scale to develop the natural gas resources here. Although some consider the Barnett Shale to be mature and in a decline, the company continues to develop this play and has seen some highly productive wells in 2011.
Devon Energy reported production of 1.28 billion cubic feet of natural gas equivalent per day from the Barnett Shale during the second quarter of 2011, representing 13% growth over last year's second quarter
While Devon Energy is now active in many other onshore plays, this core area still accounted for 32% of the company's production in the second quarter of 2011. The company plans to drill 375 wells in the Barnett Shale in 2011. (For related reading on oil, see Peak Oil: What To Do When The Wells Run Dry.)
Quicksilver Resources (NYSE:KWK) has operations in the Barnett Shale and reported 2.6 Tcfe of proved reserves here at the end of 2010.
Devon Energy is increasing development in various areas as the company looks to increase oil and liquids production. The company has approximately one million acres of leasehold in the Permian Basin in Texas and New Mexico, and reported production of 49,000 barrels of oil equivalent (BOE) per day from here during the most recent quarter.
Devon Energy is working on a number of different plays, including the Avalon Shale, Bone Spring, Wolfcamp and the Wolfberry. The company recently reported some successful wells into the Bone Spring formation with initial production rates averaging 700 BOE per day.
Devon Energy has a large investment in the Permian Basin and will operate 19 rigs here in 2011 with plans to drill approximately 300 wells.
Another operator that is working in the Bone Spring is Concho Resources (NYSE:CXO), which has 160,000 net acres under lease here. The company reported production of 5,600 BOE per day from the Bone Spring in the second quarter of 2011.
Other Liquid Plays
Devon Energy has several other areas under development that have a high content of oil and liquid hydrocarbons. The company has 243,000 net acres under lease in the Cana Woodford Shale play and grew production here 80% over last year.
The Granite Wash is another area that Devon Energy is working on in 2011. The company brought eight wells onto production in 2011, and plans to drill 55 wells here during the year.
Devon Energy has been leasing acreage in a number of emerging shale and unconventional resource plays over the last few years and has more than one million acres. These resource plays include the Tuscaloosa Marine Shale, Niobrara Shale, Mississippi Lime, and the Utica Shale in Ohio and Michigan. Devon Energy plans to start testing some of these areas and will drill at least 30 exploratory wells to these formations in 2011.
EnCana (NYSE:ECA) has leased approximately 250,000 acres prospective for the Tuscaloosa Marine Shale and will start drilling its first horizontal well in August 2011.
The Bottom Line
Devon Energy has received nearly all the proceeds from the sale of the company's offshore and international oil and gas properties and is now aggressively redeploying these funds into the Barnett Shale and a number of existing and prospective offshore plays. This intense focus on North America should make the company an even more effective operator than in the past. (For related reading, see Unearth Profits In Oil Exploration And Production.)
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