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Joint Venture deal reached between Devon and Dow to further develop the STACK increases value of Devon's stock price Tuesday

A Cactus rig drills a well for Devon Energy in 2014. [OKLAHOMAN ARCHIVES]
A Cactus rig drills a well for Devon Energy in 2014. [OKLAHOMAN ARCHIVES]

Devon Energy Corp. shares gained about 1.2% in value Tuesday after officials announced that Devon and Dow have formed a joint venture that will drill out some of its undeveloped holdings in Oklahoma’s STACK play.

Under the deal’s terms, Devon is transferring ownership of half its working interest to Dow on planned wells that it plans to drill over the next four years at 133 infill locations.

In exchange, Dow will provide Devon with about $100 million to fund that drilling program.

The amount of working interest the two will share on those infill wells, consisting of ones that are drilled with standard and extended reach laterals, is about 60%.

Officials said they expect returns for both Devon and Dow will be enhanced on the planned wells because of lower drilling and completion costs associated with focused infill development drilling and midstream incentive rates that lower per-unit operating costs every time a new well is brought online.

“This innovative agreement is consistent with our strategy to optimize the capital efficiency and returns associated with our development programs,” Dave Hager, Devon’s CEO, stated.

“Dow is a world-class organization, and this mutually beneficial agreement will help us bring forward value in the STACK while delivering carry-enhanced returns that compete effectively for capital within our portfolio.”

Devon stated Tuesday it anticipated no change to its production targets or capital spending outlook in 2020 as a result of its agreement with Dow.

Officials said work on the earliest drilling units involved in the project in northern Canadian County are expected to begin in mid-2020.

Devon officials stressed Devon retains 100% of its production and cash flow from existing STACK operations.

As for the joint venture wells, they said Devon will oversee capital allocation and project timing associated with the agreement and also will operate the wells.

“We are excited to expand our relationship with Dow to develop a portion of our liquids-rich acreage in the STACK,” said David Harris, Devon’s executive vice president of exploration and production.

“This agreement will benefit from the improvements in capital efficiency achieved in the play this year, driven by optimized infill development spacing and substantially lower drilling and completion costs.”

Chad Warmington, president of the Petroleum Alliance of Oklahoma, applauded the deal Tuesday afternoon.

“The agreement is good news for Oklahoma,” Warmington said.

Devon’s shares, traded on the New York Stock Exchange under the ticker symbol DVN, closed at $23.42 a share, up 27 cents for the day.

Related Photos
<figure><img src="//" alt="Photo - " title=""><figcaption></figcaption></figure><figure><img src="//" alt="Photo - A Cactus rig drills a well for Devon Energy in 2014. [OKLAHOMAN ARCHIVES] " title=" A Cactus rig drills a well for Devon Energy in 2014. [OKLAHOMAN ARCHIVES] "><figcaption> A Cactus rig drills a well for Devon Energy in 2014. [OKLAHOMAN ARCHIVES] </figcaption></figure>
Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›