OKLAHOMA CITY—It’s been a rough couple of years in the oil industry, but one of North America’s top independents believes the time has come to think about the recovery.

“We’re starting to turn our attention now from maintaining and preserving our balance sheet to accelerating activity and building back a growth curve,” said Tony Vaughn, COO of Devon Energy. Vaughn spoke at Hart Energy’s recent DUG Midcontinent Conference and Exposition.

Of Devon’s 2016 E&P capital budget of some $1.3 billion, the company is directing the largest slice of money—$450 million—to the Stack Play. The operator holds 430,000 net acres in the Stack, mainly in Kingfisher, Blaine and Canadian counties, Okla. Primary objectives are the Meramec and Woodford.

“We have a very deep inventory of opportunities,” Vaughn said.

Devon’s second-quarter 2016 net production from the Stack was 91,000 barrels of oil equivalent per day (boe/d), a remarkable 54% increase from 2015 net second-quarter production of 59,000 boe/d.

The Oklahoma City-based operator currently has five rigs running in the play, up from two rigs earlier in the year, and it plans to add another prior to year-end.

“This world-class asset has delivered a set of results that is pretty special for a play that is as young and immature as it is,” Vaughn said.

The whole Meramec play is working, he said, even though rock and fluid compositions and pressure regimes vary widely. Industry has drilled some 200 wells in the play to date and results have been positive across the different regimes, from the shallow, normal-pressured portion on its far eastern side to the deep, overpressured portion to the southwest.

Devon Energy calls the Meramec the best emerging development play in North America. (Source: Devon Energy, DUG Midcontinent 2016)

Devon has been directing its attention to the core oil window in the Meramec. The reservoir there offers high-pressure gradients that deliver strong flow rates and oil-weighted production that delivers excellent returns.

Devon revealed its type curve for a 10,000-ft lateral in the overpressured Meramec oil window during its third-quarter earnings call in early November. These wells can make 1.6 million boe to 2 million boe each, with 40% to 50% oil cut, and costs are $7.5 million to $9 million.

“All the characteristics are really positive for a resource play; we have good thickness, rock quality and reservoir pressure. All of this is leading to a very special play that is delivering some outstanding well results,” Vaughn said. “It is progressing quite nicely and quite rapidly.”

Devon has some 1,600 risked drilling locations in the Meramec. Currently, the company is figuring four wells per section on its assets, but it has 10 spacing tests underway to drive those risked locations higher. It has tested as many as seven laterals in one interval, and has identified as many as three separate Meramec intervals.

“We’re gaining a lot of understanding that will help us as we move into development in 2017,” Vaughn said. The company has been drilling mostly 5,000-ft laterals, but now it is moving into 10,000-ft laterals. “That will be the trend we see as we go forward into development.”

Devon also has a significant position in the Woodford shale in Canadian County. Now lumped in with the Stack Play, Canadian County is the home of the legacy Cana Woodford project. “We’ve been in this play since 2007,” Vaughn said. “Now 800 wells later, we are continuing to optimize well advancements. “

Driven by enhanced completions, recent Woodford wells are averaging rates up to 1,900 boe/d. “We have a lot of running room left, with about 3,700 risked locations,” Vaughn said.

In September, Devon started completion operations on its five-section, 40-well Hobson Row development. It has two frack crews currently running there, and it expects initial flow rates in the fourth quarter.

Additionally, during its third-quarter earnings call, the company noted preliminary plans to move four rigs into the eastern Woodford in the second half of 2017. Its next development will be Jacobs Row, a 60-well project that will feature 10,000-ft laterals.

In general, the company is favoring the eastern portion of its Woodford assets due to its lower well costs and higher oil cuts, which are around 25%. Assumptions are a type curve of 1.6 million boe and projected well costs of $6.25 million for a 10,000-ft lateral.

“With the Meramec and Woodford reservoirs in the Stack, we have a very special position in a very special play,” Vaughn said. “Everything has been positive.”

Peggy Williams can be reached at pwilliams@hartenergy.com