Devon Energy Corp. (DVN), the third- largest U.S. independent oil and natural-gas producer, raised planned exploration and production spending 18 percent to as much as $6.5 billion this year, including projects in which it may sell a stake.
Devon budgeted $500 million for an undisclosed oil play and $350 million for the Cline Shale in Texas’ Permian Basin, Chief Executive Officer John Richels said today at an analyst meeting in Houston. Another $220 million will be spent on other undisclosed locations where Oklahoma City-based Devon is still acquiring leases.
Stakes in the Cline Shale, where Devon’s 500,000 acres may contain the equivalent of 3.6 million barrels of oil, and the undisclosed areas may be sold next year for $1.35 billion to an unidentified joint-venture partner, Richels said. Devon expects to get $450 million in cash and $900 million in development spending from the partner, Richels said.
The agreement will be about “half the size” of its venture with China Petroleum Corp. (386), according to Vince White, Devon’s senior vice president for investor relations. That company agreed in January to buy a one-third stake in five Devon exploratory projects in the U.S. for $900 million in cash and as much as $1.6 billion in development costs.
“We’re very excited about the Cline,” Andy Coolidge, Devon’s vice president for the Permian Basin, said at the meeting. “We expect to deliver highly economic and robust production growth.”
No ‘Big’ Acquisitions
Devon will reinvest its cash in exploration and production and won’t do “big, dilutive” acquisitions, Richels said.
The company’s spending plan of $6.1 billion to $6.5 billion was boosted $1 billion from a February estimate for exploration and production this year. Devon sees production at the equivalent of more than 710,000 barrels a day by the end of the year.
In the undisclosed oil play, Devon currently holds 250,000 acres and wants to double that to 500,000 acres, Richels said.
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