Devon Energy (NYSE: DVN) will still have plenty of oil and gas assets left to develop, even after its recently announced plan to shed its international and Gulf of Mexico assets is completed.
If all the sales are successful, the company will divest 199 million barrels of oil equivalent (BOE) of proved reserves and current production of 76,000 BOE per day. Devon Energy expects to receive $4.5 billion to $7.5 billion in after-tax proceeds from the sales.
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The company will still have plenty of areas to develop in the onshore basins in North America. Here is a review of some of the most promising.
Barnett Shale
Devon Energy was a first mover in the Barnett Shale through its acquisition of Mitchell Energy, and it perfected the hydraulic fracturing technique that everyone else now uses in North American shale plays. The company has 696,000 acres here, including 511,000 acres in the core area.
Some may refer to this as Devon Energy's legacy base, but the company is still developing this area and plans to drill 370 wells in 2010, up from 285 in 2009. The company currently produces 1.1 billion cubic feet equivalent (BCFE) per day of natural gas. Another major player in the Barnett is EOG Resources (NYSE: EOG) with 90,000 core acres in a north extension of the Barnett Shale that produces mostly oil.
Jackfish Development
Devon Energy is also keeping its interests in the Jackfish development in Canada. The company is producing 35,000 barrels of oil per day from the project's first phase and is building phase two, which is expected to be operational by 2011. It will file for phase-three permits sometime in 2010. Each project phase is expected to have estimated ultimate recovery (EUR) of 300 million BOE.
Devon Energy is not the only energy company excited about the Canadian oil sands. Suncor Energy (NYSE: SU) just announced its capital budget for 2010 and said that it would spend $5.5 billion CAD with a goal of accelerating its oil sands production growth.
U.S. Shale Plays
Devon Energy has also built up a respectable acreage position in the Haynesville Shale, where it has 47,000 net acres under lease. The company has only drilled one well to date here but plans 100 wells over the next two years.
In the Woodford Shale, Devon Energy has 109,000 acres under net lease, and it produced 53 million cubic feet equivalent per day of natural gas in Q3 2009.
Canadian Shale Plays
If all these areas aren't enough to keep it busy, Devon Energy has leased 153,000 acres in the Horn River Basin in Canada. The company plans 12 wells here in 2010 to de-risk some of the acreage.
This area is so promising that it has attracted the attention of industry giant Exxon Mobil (NYSE: XOM), which has 250,000 net acres under lease to develop.
Devon Energy will also transform its balance sheet once the divestitures are done. The company will reduce its debt from the current $6.9 billion to $2.5 billion by the end of 2010. Its net debt to total capitalization will be 13% if all goes as planned. These figures assume after-tax proceeds of $5.5 billion from the sale of the assets.
Attractive And Balanced Play
Devon Energy will still pack quite a punch among the top tier of the independent exploration and production companies, even after it sells part of its asset base. This makes it an attractive and balanced play in the sector. (For a primer on the oil industry, refer to our Oil And Gas Industry Primer.)
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