Must-know points from Devon Energy’s $6 billion acquisition (Part 5 of 6)
This acquisition was Devon Energy’s first step into the South Texas Eagle Ford play. The company has put forth an aggressive growth plan for the asset over the coming years.
For 2014, DVN expects to spend $1.3 billion total to drill ~130 net wells or 200 gross wells (200 in DeWittt County, which is operated with BHP with a 50% working interest and 30 in Lavaca County). While current production from the assets totals 53 thousand barrels of oil equivalent per day, 2014 production is forecast to be 70 thousand to 75 thousand barrels of oil equivalent per day, or growth of roughly 40%.
Over the next few years through 2017, Devon expects to grow production at a compounded annual growth rate (or CAGR) of ~25% per year, so that estimated 2017 production is approximately 135 thousand to 145 thousand barrels of oil equivalent per day. The company has stated that it expects more than $2.5 billion of free cash flow from the acquired properties through 2017.
Note that Devon has stated it has ~1,200 undrilled locations identified, and it plans to drill at a pace of ~230 wells a year. This means the life of the inventory is roughly five years (1,200 divided by 230), which is relatively short.
Browse this series on Market Realist:
- Part 1 - Devon Energy agrees to acquire GeoSouthern’s Eagle Ford properties
- Part 2 - Devon Energy’s latest acquisition is in the Eagle Ford “core”
- Part 3 - Was Devon Energy’s new Eagle Ford acquisition a good deal?
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