Devon Energy (NYSE:DVN) has a large development program planned for the Woodford Shale through 2016 as the company pursues an overall plan to increase liquids production over the long term.

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Woodford Summary
Devon has 244,000 net acres under lease in the Woodford Shale, with approximately 80% of the acreage in the oil and liquids portion of the play. The company reported Woodford Shale production of 250 million cubic feet (Mcf) of natural gas equivalents per day in the fourth quarter of 2011.

The company exited 2011 producing 275 Mcf of natural gas equivalents per day, with 27% of this production composed of crude oil and other liquids.

It estimates that it has 11.4 trillion cubic feet of net risked resources in the Woodford Shale. The company has allocated $870 million in capital to the Woodford Shale and plans to drill approximately 200 wells here in 2012.

SEE: Oil And Gas Industry Primer

Long-Term Development
Devon plans to invest billions in the Woodford Shale over the next five years and estimates that production will grow at a compound annual growth rate (CAGR) of 30% from 2011 to 2016. The production of liquids would grow even faster and increase at a CAGR above 40%.

This growth rate would boost production to 700 Mcf of natural gas equivalents per day in 2016, up from 200 Mcf of natural gas equivalents per day in 2011. Liquids production would increase from 9,000 to 50,000 barrels per day under this growth scenario.

The company is also working on an extension of the Woodford play and is currently evaluating this additional acreage. It is optimistic on this extension area which is more geologically complex and would produce liquids and natural gas from the Woodford and Mississippian formations.

SEE: What Determines Oil Prices?

Total Company Production Growth
The development of the Woodford Shale is an integral part of the company's overall plan to grow liquids production through 2016. Devon estimates that total company production will grow at a CAGR from 6 to 8%, with liquids growing at a CAGR between 16 and 18%.

Other Operators
Continental Resources (NYSE:CLR) is also active in the liquids portion of the Woodford Shale and reported average daily production of 7,164 barrels of oil equivalent (BOE) from here in the third quarter of 2011. A recent well reported by the company in the southeast portion of the Woodford Shale produced 5.4 Mcf and 160 barrels per oil per day. The company has budgeted $355 million in capital in 2012 for the development of its Andarko Woodford assets.

Marathon Oil (NYSE:MRO) has 160,000 net acres prospective for the Woodford Shale and is currently operating six rigs in this play. The company reported average production of 4,500 BOE per day from the Woodford Shale in February 2012 and expects to grow production here to 30,000 BOE per day by 2016.

In early 2011, Newfield Exploration Company (NYSE:NFX) started to build a position in an undisclosed liquids play in the onshore United States. The company finally revealed this stealth play as the Woodford Shale and has 125,000 net acres under lease. Newfield has an aggressive development program planned for this area and will operate up to seven rigs and spend approximately $300 million here in 2012.

SEE: A Guide To Investing In Oil Markets

The Bottom Line
One of the impediments to the reduction of domestic natural gas supply is the continued growth in the development of wet gas plays in the U.S. While Devon's drilling program in the Woodford Shale may be good for the company, it will not contribute to improved fundamentals in the natural gas markets.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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