Devon Energy Corp. (NYSE: DVN) announced today an increase to its risked drilling inventory in the Delaware Basin following a successful Leonard Shale stacked spacing test in southeast New Mexico.
The Thistle spacing pilot tested 400-foot vertical spacing between the Leonard Shale “B” and “C” intervals in the southwest corner of Lea County, New Mexico. Initial 30-day production rates from this two-well pilot averaged 1,800 oil-equivalent barrels (Boe) per day per well, of which 75 percent was light oil. The Thistle wells were drilled with 7,000-foot laterals at a cost of about $6 million per well.
Early results from the Leonard Thistle pilot also indicate minimal interference between wells, suggesting potential for joint development of multiple intervals in this portion of the Leonard play. With the success of this stacked spacing test, Devon is now raising its risked inventory in the Leonard Shale to 950 gross locations. This increase in risked inventory represents growth of nearly 20 percent from previous estimates and conservatively assumes only six wells per surface section. The company expects its risked inventory in the Leonard to continue to expand with further delineation work.
Overall, the company has 60,000 net surface acres in the Leonard Shale play, with gross pay ranging up to 1,100 feet and as many as three different landing intervals. Adding up the Leonard leasehold by target landing interval, Devon has exposure to 160,000 net effective acres. This early-stage development play has potential for greater than 1 billion Boe of recoverable resource.
“The strong flow rates from the Thistle spacing pilot is another example of the positive rate of change we are achieving in the Delaware Basin and is another critical step in further delineating the massive resource upside associated with our North American onshore portfolio,” said Tony Vaughn, chief operating officer. “In the upcoming year, we plan to continue to accelerate drilling in our world-class Delaware Basin and STACK assets. We expect this increased activity to deliver strong growth in high-margin production and further expand our recoverable resource in the U.S.”
Delaware Basin: A Multi-Decade Growth Platform
Devon has one of the best Delaware Basin positions in the industry with stacked-pay potential providing exposure to the Delaware Sands, Leonard Shale, Bone Spring, and Wolfcamp formations. The company's position is extremely well positioned on the North American cost curve. In aggregate, the company has exposure to 670,000 net acres by formation, with nearly 6,000 risked undrilled locations and greater than 20,000 unrisked locations in this basin.
Converting the massive and growing opportunity in the Delaware Basin into production and free cash flow is a top priority for the company. Devon remains on track to accelerate drilling activity to three operated rigs by year end 2016. Depending upon cash flow availability, the company has the potential to further ramp-up activity to as many as 10 rigs by the end of 2017. This increase in drilling activity will focus on the Bone Spring, Leonard Shale and Wolfcamp targets.