Devon to focus on Delaware basin capex in 2024

Executives at Devon Energy Corp., Oklahoma City, plan to concentrate their drilling investments more highly in the Delaware basin next year and step back on activity in Willison and Eagle Ford, resulting in oil production guidance level with this quarter of 315,000 b/d.

Speaking to analysts Nov. 8 after reporting Devon’s third-quarter results, president and chief executive officer Rick Muncrief and other executives said they are planning 2024 capital spending of $3.3-3.6 billion, a 10% drop from this year’s estimated $3.8 billion. About 70% of those investments will be dedicated to the Delaware basin, where Devon controls about 400,000 net acres.

The Delaware’s share of projected 2024 capex is up from about 60% this year and Muncrief said Devon is looking to build on well productivity gains notched in recent months. During the third quarter, the average 30-day initial production from wells in the basin jumped more than 20%. An additional 10% increase in productivity could be realized in 2024, in part by focusing on Wolfcamp formations and a more efficient infrastructure network around wells, he said.

Devon’s total Delaware basin production averaged 440,000 boe/d during third-quarter 2023, 215,000 of which was oil. Those numbers were up from 421,000 and 210,000, respectively, in the same period of 2022. The company has been emphasizing properties on the New Mexico side of the basin.

While allocating a larger share of a smaller capex budget to the Delaware basin, Devon will cut its work in the Williston basin—which produced 54,000 boe/d last quarter–by half in 2024 and also do less assessment work at in the Eagle Ford.

Chief operating officer Clay Gaspar told analysts the company spent more time and money on assessment work in those areas this year and “had to reach a little deeper into the bullpen,” which diluted productivity. Heading into 2024, Devon will focus on the highest-potential zones and capitalize on what it has learned in 2023, he added.

Devon’s total oil production during the quarter was 321,000 b/d. That is expected to slip to about 315,000 in this year's fourth quarter in part because of declines from Williston basin wells. Looking to 2024, Devon executives see another slight drop in the first quarter, when they plan to add back a fourth Delaware basin frac crew that was dropped this summer. Full year oil production guidance is 315,000 b/d.

“We have no intention of adding incremental barrels into the market at this time,” Muncrief said.

Devon produced a third-quarter net profit of $920 million on revenues of more than $3.8 billion. As with its peers, those numbers are down significantly from third-quarter 2022—when the company earned $1.9 billion on a top line of more than $5.4 billion—due lower realized prices. In the 3 months ended Sept. 30, Devon’s total oil equivalent realized price was $46.92 versus $58.48 in the prior-year quarter.

Shares of Devon (Ticker: DVN) were down nearly 3% to $44.02 in midday trading Nov. 8. They have given up about 10% over the past 6 months, a trend that has cut the company’s market capitalization to about $28 billion.