Devon Energy Corp. is looking for new opportunities despite its impressive portfolio of onshore oil and natural gas assets in North America.
The Oklahoma City-based oil and natural gas company's search has led officials to increase the company's capital expenditure budget by about $1 billion so it can spend more on exploration drilling and leasehold acquisition.
Company officials outlined Devon's five-year plan Wednesday for about 130 securities analysts and money managers in Houston. More than 800 others listened in online.
“We're a company with a very deep inventory of opportunities that work in spite of the commodity price and cost challenges that base this industry,” CEO John Richels said. “We have a lot of upside from a very exciting suite of exploration of prospects and we're continuing to add to them all the time.”
Richels said Devon is always on the lookout for new oil and liquids-rich plays in areas where lease rates and royalty payments are not too high.
Devon's latest resource play is the Cline Shale in West Texas' Permian Basin.
The company has amassed about 500,000 net acres in the light oil play, where it plans to drill 15 wells this year, said Dave Hager, Devon's executive vice president of exploration and production.
“We're not stopping there. We're playing
He said Devon has amassed about 250,000 acres in the unnamed play, with plans to double its holdings.
With that in mind, Devon is boosting its budget for exploration drilling and leasehold acquisition.
“It's going to increase our 2012 capital budget by about $1 billion,” he said.
That will push Devon's capital budget this year to as much as $6.5 billion, although the company could add a joint venture partner to defray its costs in the new play.
Hager said such a partnership likely would be half the size of the $2.5 billion deal with China's Sinopec International Petroleum Exploration & Production Corp. announced in January.
Sinopec will pay $900 million in cash to Devon when the deal closes for a one-third interest in Devon's holdings in five emerging resources plays. The Chinese firm also will pay 70 percent of Devon's drilling costs until the remaining $1.6 billion is spent.
Devon is spending all of its capital this year on oil and liquids-rich projects. “We are not drilling dry gas wells,” due to stagnant natural gas prices, he said.
Devon expects to increase its production to about 710 million barrels of oil equivalent by the end of the year, thanks to continued growth in oil and liquids production.
Richels said all of Devon's core resources plays are growing, so the company is projecting annual production increases of 6 percent to 8 percent a year through 2016.
“We hope that you walk out of this presentation as confident and as bullish about the future as the rest of us are,” he said.