Monday, August 10, 2009

Devon: Update

Slow and steady Devon, which is the largest leasehold owner in the Haynesville Shale, reported earnings last week and gave an update on its Haynesville activities. The company is moving methodically around its leasehold to "de-risk" newly leased portions that are not held by production.

Most recently, it focused on the 110,000 acres it leases around Carthage, TX. In drilling, coring, mapping and analyzing results, the company has de-risked 74,000 of the 110,000 acres in this area and has pinpointed 800 potential drilling sites. A couple of completions the company noted:

  • A 118H: 5 MMcf/day 24 hour initial production; Carthage Field, Panola County
  • Smith Bird 20H: "greater than 6 MMcf/day" 24 hour IP

In terms of its initial production rates, the company executives went out of their way to explain that they have been choking back wells during completion because they believe it will help ultimate recoveries. They made it fairly clear they could produce stronger IP rates if they want. I imagine they want to placate investors and analysts who are seeing eye-popping IP numbers from other companies.

Next, the company will move south and examine its holdings in San Augustine and then Shelby Counties where it leases around 47,000 acres. Outside of these areas, the remaining leasehold is largely held by production.

As with other companies, Devon is seeing greater production efficiencies ("60% improvement in drilling efficiency") and lower drilling costs (about $7-9 million per well).

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