Thursday, February 18, 2010

Devon: Update

Devon Energy also reported earnings this week.  Although the company has a large Haynesville Shale leasehold, it has not been a big driller to date since a good portion is held by production.  For 2010, Devon has a $250 million capital budget for the Haynesville Shale and plans to run five rigs.

Devon has become famous for its S. Kardell G.U. #1 well in San Augustine County, which produced a monster 30.7 MMcf/day initial production rate for 24 hours.  Now, the news on this well is rather mixed.  The well produced just under one Bcf for the first 90 days but it is only flowing at 3 MMcf/day right now.  Kardell is Devon's first well in the southern part of the play (the company drilled eight wells in the Carthage area in 2009), so management is trying to figure out the geology of the area.  On the quarterly conference call, Devon officials noted that the Haynesville Shale is thinner in the southern part of the play, which might yield lower estimated ultimate recoveries (EUR) in this area compared to the Carthage area, where Devon expects EURs in the 6 Bcfe range.  The Kardell well might be a cautionary tale against high IP rates.

Devon is currently drilling two Middle Bossier Shale wells, one around Carthage, TX and the other in the southern part of its Texas acreage.  The company has high expectations for these wells, especially in the south, where the Bossier Shale is fairly thick.

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