Devon Energy Corporation (NYSE: DVN) has assets in the very best North American resource plays and a deep inventory of opportunities.
After initiating a large-scale non-core divestiture program, Devon is sitting on 4.6 billion of liquidity and no significant near‐term debt maturities. Of the 2016 E&P Capital Budget, 33% is designated for the STACK play in Oklahoma. STACK is an acronym referring to the Sooner Trend Anadarko (Basin) Canadian and Kingfisher counties. The core of the play is located across Kingfisher, Blaine, and Canadian counties.
After doubling down in the STACK play through its $1.9 billion acquisition of Felix Energy’s 80,000 net acre position in the area back in Q4 of 2015, Devon has amassed a large position in the STACK play with its top two reservoir targets being the Meramec and Woodford. Devon Energy has a 430,000 net acre position in the STACK, with 200,000 of those net acres prospective for the Meramec play. Under its current four well per section model, Devon has 1,600 gross risked well locations in the over-pressurized Meramec oil window.
Attracted by excellent reservoir properties (thickness, permeability, porosity), strong flow rates, returns enhanced by oil‐ weighted production and low well costs, much of the activity in the STACK has been centered on the Meramec, not only because of its economics, but also because it is shallower than the Woodford, and therefore a bit less expensive to drill in order to hold acreage positions. So far the industry has completed around 140 wells in the emerging Meramec play and initial results show that it is commercially viable and very economical. It still remains to be seen whether it will be more efficient to develop the Meramec and Woodford intervals simultaneously, or one then the other.
Devon Achieves STACK Success With Record Oil Well and Spacing Pilot.
The company announced on Monday that it has brought online a record-setting oil well in southwest Kingfisher County in addition to completing another successful spacing test.
Devon announced the Pony Express 27-1H was drilled in southwest Kingfisher County (Sec 27-16N-09W) with a 5,000-foot lateral and achieved a 30-day average rate of 2,100 Boe per day, consisting of 1,500 barrels of oil per day, or 70 percent of the production mix. Oil productivity from the Pony Express is the highest of any Meramec well drilled to date in the play on a per lateral foot basis.
Devon is working on downspacing and staggered tests to drive location count higher, testing up to 8 wells per section across 1 interval in Meramec. Staggered lateral pilots underway could further expand potential in Meramec. It is also evaluating joint development of Meramec and Woodford reservoirs.
Devon now has two spacing pilots with additional tests underway to optimize the company’s 2017 development plan. The Pump House in the STACK play was identified as the next pilot in the press release. Successful test results will allow Devon to proceed with full-field development in 2017.
According to the energy company’s press release, “the Alma spacing pilot tested five wells per section across a single interval in the upper Meramec, delivering 30-day production rates averaging 1,400 oil-equivalent barrels (Boe) per day per well, of which 60 percent was light oil. In addition to the strong initial-production rates, early flow-back results from the Alma pilot indicate minimal interference between wells, suggesting potential for tighter spacing in the over-pressured oil window. The Alma wells were drilled with 5,000-foot laterals and were conservatively brought online with a 12/64-inch choke and gradually increased to a 20/64-inch choke.”
“The Alma spacing pilot and record-setting Pony Express oil well are examples of the excellent results we are achieving in the Meramec formation, which has quickly evolved into the best emerging development play in North America,” said Tony Vaughn, Devon’s Chief Operating Officer. “These successful well results help us further understand the optimal development scheme for Devon’s industry leading STACK position as we prepare for full-field development in 2017.”
WHAT TO WATCH FOR:
Staggered well laterals and the downspacing pilot programs for the rest of 2016 & 2017. Successful test results will allow Devon to proceed with full-field development in 2017 and well locations will grow accordingly.