Devon Energy, who will serve as operator, will retain 100% of its production and cash flow from existing operations in the STACK play
US-based companies Devon Energy and Dow have partnered to develop some of Devon’s STACK acreage in central Oklahoma, US.
Under the agreement, Devon will monetise half of its working interest in 133 undrilled locations in exchange for about a $100m drilling carry over the next four years.
Devon Energy stated that the average working interest is projected at 60% across a combination of standard and extended-reach lateral drilling locations.
Apart from drilling carry benefits, the company’s returns linked with the agreement are expected to be improved by lower well costs from focused infill development drilling and midstream incentive rates that lower per-unit operating costs for each new well brought online.
Devon president and CEO Dave Hager said: “This innovative agreement is consistent with our strategy to optimize the capital efficiency and returns associated with our development programs.
“Dow is a world-class organization and this mutually beneficial agreement will help us bring forward value in the STACK, while delivering carry-enhanced returns that compete effectively for capital within our portfolio.”
Devon, who will serve as operator, will retain 100% of its production and cash flow from existing operations in the STACK play.
Devon exploration and production executive vice president David Harris said: “We are excited to expand our relationship with Dow to develop a portion of our liquids-rich acreage in the STACK.
“This agreement will benefit from the improvements in capital efficiency achieved in the play this year, driven by optimized infill development spacing and substantially lower drilling and completion costs.”
Devon Energy anticipates no change to production targets in 2020
Devon Energy expects no change to its production targets or capital spending outlook in the next year owing to the agreement.
The company said that activity in 2020 will commence with the development of two drilling units in northern Canadian County, where drilling operations are anticipated to begin mid-year.
For the deal, Vinson & Elkins served as legal advisor to Devon while Latham & Watkins acted as legal advisor to Dow.