Devon CEO: Will Increase Capital Expenditure By $1 Billion In 2011
By Ryan Dezember
Of DOW JONES NEWSWIRES
HOUSTON -(Dow Jones)- Devon Energy Corp. (DVN) Chief Executive John Richels said Tuesday that the company will spend $1 billion more than originally planned looking for and producing oil and gas this year.
Increasing its spending to between $5.5 billion and $5.9 billion will allow the company to ramp up drilling in oilfields in which it is well established as well as launch programs in several areas in which it has only recently gained a foothold, executives said in a webcast meeting with analysts.
“We’ve got a big opportunity portfolio and we’re trying to move that value forward,” Richels said.
Devon will use proceeds from the $3.2 billion sale of its Brazilian assets to BP PLC (BP, BP.LN), a deal that closed last month, to fund the ramped-up spending, Richels said.
The Oklahoma City company over the last two years has shed its offshore and international assets in order to concentrate on North American onshore production. The Brazilian sale was the last of about $10 billion worth of assets the company has sold, netting an after-tax gain to the company of about $8 billion.
The $1 billion in added spending includes $200 million to cover inflated service costs and $100 million to account for unforeseen weakness of the U.S. dollar against the Canadian currency.
Devon has extensive operations in Northwest Canada and plans to spend part of $400 million to accelerate exploratory drilling there and in the Permian Basin in West Texas, where the company plans to drill 310 wells this year.
Portions of that $400 million in added exploratory spending will also be allocated to five new oilfields in which Devon has recently built positions.
Those new positions include 300,000 acres in Wyoming’s Niobrara Shale,150,000 acres in Oklahoma’s Mississippian oilfield, 110,000 acres in Ohio’s Utica Shale, and 300,000 in Michigan’s portion of that same rock formation.
The company earlier this year disclosed a 250,000-acre position in the Tuscaloosa Shale, which straddles the Louisiana-Mississippi border.
“We’re pretty excited about what we have,” Richels said, admitting that if each of the plays pan out, Devon would need to find additional funding to fully develop them. “We wouldn’t be shy about looking for alternative ways to fund them either.”
The remaining $300 million of the added $1 billion will be used to extend drilling programs in Devon’s operation in the Barnett Shale near Dallas and Oklahoma’s Cana-Woodford Shale through the end of the calendar year, said Dave Hager, who heads Devon’s exploration and production business.
As a result, Devon plans to drill 375 wells, up from 325, in the Barnett and 225 wells, up from 200, in the Cana, Hager said.
Shares of Devon closed 2.58% higher at $77.98 on Tuesday.
-By Ryan Dezember, Dow Jones Newswires; 713-547-9208; ryan.dezember@dowjones.com
Dow Jones Newswires
June 28, 2011 18:48 ET (22:48 GMT)
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