Devon Energy Corp. has no shortage of experience in shale plays, so it's no surprise the company chose to look beyond the emerging Mississippian formation in its home state.
Devon dug deeper, finding an oil-rich shale formation that officials introduced during this month's earnings call.
CEO John Richels and Dave Hager, Devon's chief operating officer, hailed central Oklahoma's Woodford oil shale as an “exciting” play for the company.
“To date, we've identified 1,000 risked locations in this light-oil resource play,” Richels said during the Aug. 7 call with analysts.
Hager said Devon has completed 29 wells in the play, with 10 of those wells providing initial production of more than 800 barrels of oil equivalent a day.
Kris Goforth, vice president for Devon's Mississippian business unit, said developing the Woodford was a natural progression for Devon given its history with shale.
Devon was a pioneer in north Texas' Barnett Shale, one of the first plays where producers were able to figure out how to unlock oil and natural gas from dense rock formations.
“We were looking at the Woodford all along,” she said. “We have a lot of shale experience at Devon.”
Goforth said the formation is similar to western Oklahoma's Cana Shale, but it produces more oil.
“It's a true oil play,” she said.
Morningstar analyst Mark Hanson said the discovery bodes well for Devon and its shareholders.
“Early results from the Woodford appear impressive and could provide an additional boost to Devon's oil and liquids growth program in the years ahead,” Hanson wrote in an Aug. 7 note to clients.
Devon holds about 650,000 acres in the Mississippian. Officials estimate about 400,000 acres could have Woodford potential.
Goforth said Devon's acreage in the region is unique because there is a thick zone of shale sitting below the limestone that makes up the Mississippian formation.
She said the company's first wells in the Woodford have produced about 80 percent oil. Over time, the play is expected to yield an equal mix of oil, natural gas and natural gas liquids.
Oklahoma City-based SandRidge Energy Inc., the leading producer in the Mississippian, also is looking at the Woodford.
“SandRidge has initiated its Woodford testing program, and we have a large acreage position that is prospective for Woodford development,” spokesman Greg Dewey said. “We believe the potential exists for stacked Mississippian and Woodford development.”
Devon will focus on the Woodford this year, with 15 active rigs in the play, even though it is still shooting 3-D seismic in some areas.
Goforth said the company, which has established a field office in Stillwater, has a budget for up to $1.3 billion for the Woodford, thanks to its joint venture with Chinese oil giant Sinopec.
Devon will concentrate on Payne, Logan and Noble counties, with plans to drill 350 wells by the end of the year.