American Oil and Gas Reporter - May 2021 - 49

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SpecialReport: Industry Playmakers
Stepping down a rung or two in corporate size, numerous smaller-sized players
continue to make equally big moves-
albeit on scales commiserate with the
operational structures of their organizations. For instance, SilverBow Resources
is actively seeking opportunities to expand
its scope in the Eagle Ford through
mergers and acquisitions, newcomer Merica Oil Company is rolling out a new
vertical drilling program targeting conventional reservoirs in Kansas, and U.S.
Energy Development is pursuing both
operated and nonoperated partnerships
in the Delaware as well as other basins.
Major Merger
Devon Energy Corp. has emerged as
one of the Permian's most prominent
players after completing a " merger of
equals " with WPX Energy in January,
with the company retaining Devon's name,
Oklahoma City headquarters, and a blended
board and executive team. The two companies' portfolios overlapped in the
Delaware Basin, where it is now a dominant
leaseholder with some 400,000 net acres
in the economic core of the play, but
Devon also holds assets in the Anadarko,
Eagle Ford, Powder River and Bakken.
When the deal closed, Devon Energy
became one of the top five largest unconventional oil producers, with daily production of 580,000 barrels of oil equivalent
and a capital budget of $1.6 billion-$1.8
billion. The majority of the CAPEX program is earmarked for the New Mexico
and Texas portions of the Delaware, where
Devon's 2021 oil production is forecast
to average 280,000-300,000 bbl/d.
This spring, Chief Operating Officer
Clay Gaspar and his fellow executives
are busy integrating the two heavy hitters
into a better, larger Devon built to grow
through the bit with an inventory of thousands of wells replete with a lengthy list
of high-graded Delaware Basin prospects.
Devon also has new economies of scale
and structural efficiencies that are expected
to save $575 million in annual operating
costs, Gaspar says.
" We are in the early stages of really
coming together as a team, but I think
this investment and the time we are spending is an important process that will allow
Devon to take a significant step up as we
go forward, " he comments.
With both legacy organizations considered low- to no-growth companies focusing on generating free cash flow after
periods of exceptional growth, the new

Devon will generate consistent growth
in the single digits and create long-term
value for shareholders that also will
benefit service company partners and employees, Gaspar points out.
While assuring that staffs are on the
same page on formation names and the
like, and ensuring the best of best practices
and technical know-how, the company is
combining teams that have proven their
mettle on Devon's legacy acreage in
southeastern New Mexico and WPX's
former core position in Texas.
The fruit of their labors just prior to
closing included 23 mostly Bone Spring
wells brought on line in Devon's legacy
New Mexico acreage with 30-day initial
production rates averaging 3,200 boe/d
(70% oil) and 26 new wells in WPX's
legacy Stateline area in Texas targeting the
Upper Wolfcamp and Bone Spring with
average IPs of 2,300 boe/d (61% oil).
Now, the New Mexico team with expertise in the Bone Springs formation
can be leveraged in Texas, where the
play is emerging, Gaspar points out. Conversely, WPX's Wolfcamp experts in
Texas can work completions on the emerging Wolfcamp on the New Mexico side.
Differences in completion design philosophy are being worked out, he adds,
including whether to use 100 percent
100-mesh sand or a mix of 40/70- and
100-mesh on laterals typically averaging
10,000 feet in length and frac designs
ranging from 2,000 to 2,500 pounds of
proppant per lateral foot.
Although 35% of Devon's Delaware
holdings are on federal lands in New
Mexico, Gaspar says the company has
been able to mitigate the risks associated

with the U.S. Bureau of Land Management's decision to impose a 60-day
freeze on new permits in January, and
feels it in a good position. Devon already
had secured more than 500 federal drilling
permits in New Mexico, which will provide drilling opportunities for years,
Gaspar explains.
Devon also will continue to focus on
the Williston, Powder River, Eagle Ford
and Anadarko, which will complement
its Delaware holdings as it looks to fund
its base dividend and grow its variable
dividend, according to Gaspar.
Assessments of potential asset acquisitions will continue, but the bar will be
high, he emphasizes. " Just because we
are actively in conversation and showing
eagerness to evaluate new ideas, we also
have to reflect back in the mirror and
make sure it is truly accretive to the story
we have, " Gaspar remarks. " That is the
interesting balance that we play. I would
not rule out any of those basins as places
for future deal potential. "
Powder River Position
After closing in March on a $215 million purchase of 130,000 net acres from
Samson Resources II in the Powder River
Basin, Oklahoma City-based Continental
Resources Inc. plans to do what it typically
does in new plays: apply what the company
has learned elsewhere and take reservoir
performance to the next level, says President and Chief Operating Officer Jack
Stark.
Armed with 96 approved federal
drilling permits, Continental, which will
spend approximately $80 million in the
Powder River this year, is deploying

After completing a merger of equals with WPX Energy in January, Devon Energy has
emerged as a dominant player in the Delaware Basin, where it holds 400,000 net acres
in the economic core of the play. Devon is active in the Anadarko, Eagle Ford, Powder
River and Bakken.

MAY 2021 49

American Oil and Gas Reporter - May 2021

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