FORT WORTH, Texas—When planning up to 84 wells in a square mile in the Delaware Basin, the task is further challenged by this additional goal: Leave no reserves behind. This is Devon Energy Corp.’s (NYSE: DVN) mantra in developing its stacked potential in southeastern New Mexico, according to Rick Gideon, senior vice president of U.S. operations.
“Let’s go to the center part of Lea and Eddy counties—the best part of our basin,” Gideon told attendees of Hart Energy’s recently held DUG Permian Basin conference. There, it has 10 to 12 landing zones on average and can put in an average of seven wells per 640-acre section in each landing zone.
“All of a sudden, there is a potential to have 70 to 84 wells per section. … How do I not strand reserves?” And while increasing rate of return and bringing PV (present value) forward? We have to have advanced data to determine a lot of these landing zones. … That’s data analytics,” he said.
Devon is turning to its TRAC program: Total Reservoir Access Concept. Development of its in-house big-data machine began in 2011 as a first, master, data-management system. Between 1998 and 2006, the company had completed 27 mergers and acquisitions—bringing in 27 different sets of data. Launching the system “was tough and it took us a number of years,” Gideon said. But, “without it, we can’t do what we’re doing today. It’s like building a house without building your foundation. I like to think we’re building a very solid foundation.”
It was used in 2012 in a pilot project in West Texas and, today, the company has “decision-support centers” in each of its field offices.
“At the same time, I’ll tell you it’s not easily adopted,” Gideon added. Among some personnel, “we’ve had it called everything from ‘Star Wars’ to ‘gee-wiz science.’” However, personnel have come around to relying on the additional input, “once they see the results and what it does for their job.”
Devon’s largest personnel adds within a workgroup during the oil-price downturn were in data and analytics. “Where we’re at today, the only limiting factor to what we will do with our advanced analytics will be our imagination. … I truly believe we can (become) more efficient than where we are today.”
Devon has 285,000 net acres prospective for Bone Spring, 225,000 for Wolfcamp, 60,000 for Leonard shale and 80,000 for Delaware sands. It plans to spend $700 million in the basin this year—about 60% of that in the Leonard and Wolfcamp.
It exited 2016 with $2 billion of cash and a $3-billion, undrawn, bank facility. Its investment-grade credit rating continues as it completed $3.2 billion of divestments during 2016.
Companywide, it produced 244,000 barrels of oil a day in the fourth quarter of 2016; barrel of oil equivalent (boe) per day was 537,000. First-90-day IPs during 2016 were the best in the company’s 45-year history—up more than 300% from 2012.
Gideon said Devon is often asked, “How do you get that much growth?” It’s primarily from having “a focused plan in some of the best resource plays. … And one of the ways you do that is via the vehicle of big data.”
U.S. reserve additions in 2016 were at a finding cost of $5/boe, excluding property-acquisition costs. From the Delaware in particular, its net production averaged 54,000 boe/d in the fourth quarter—72% liquids. Lease-operating expenses per boe declined to $7.42 from $16.87 in the first quarter of 2015.
It plans to average seven rigs this year in the Delaware and exit 2017 with between eight and 10. This is up from three rigs at year-end 2016.
Wells are being drilled about 84% faster per foot today than two years ago, Gideon said. “Another way of saying that is we’re drilling almost twice as many feet a day … which is good because our lateral length is getting longer also.”