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Devon to unload Cherokee coalbed methane assets Sale package includes 400 wells, 379,000 acres in Kansas, Oklahoma Petroleum News
Big U.S. independent Devon Energy has put the lion's share of its Cherokee coalbed methane assets up for sale, saying they no longer measure up to company standards.
�It's very labor intensive, and we felt we could better use those people elsewhere,� Larry Nichols, Devon's chief executive officer, said during a Sept. 9 Web cast of a meeting with analysts.
Devon said it enlisted Petroleum Place Energy Advisors to help with the sale of about 379,000 net acres in southeast Kansas and northeast Oklahoma. The company said it would retain about 41,000 Cherokee acres in the Arkoma Basin.
�This is coalbed methane (acreage) in an area of conventional production we picked up in the Ocean Energy merger,� a spokesman for Devon said of the Cherokee assets the company decided to keep.
Cherokee acreage to be sold includes about 400 wells and just under 20 million barrels of oil equivalent reserves, Devon said. Excluding Cherokee, Devon owns about 700,000 acres of coalbed methane acreage in Wyoming, New Mexico, Louisiana and western Canada.
Coalbed methane makes up just 125 million cubic feet per day of Devon's 2.4 billion cubic feet per day of total natural gas production. In Wyoming's Powder River Basin alone, Devon produces about 80 million cubic feet of gas per day from coalbed seams. Additional horizontal wells at Barnett Shale At Barnett Shale in East Texas, another unconventional gas play, Devon said it plans to drill about 70 horizontal wells in 2003, up dramatically from the 10 wells announced earlier this year, and another 90 horizontal wells in 2004. The company said horizontal wells in its core producing area yield initial daily rates of 1 to 4.8 million cubic feet, about three times more than vertical wells.
Since acquiring Barnett Shale through its merger with Mitchell Energy in early 2002, Devon has drilled several hundred wells and ramped up gas production to 550 million cubic feet per day. In fact, Barnett has emerged as Devon's single largest North American asset.
Devon said 2004 would see a bigger push by the company into non-core areas of Barnett Shale, where Devon has identified 1,000 potential locations to drill. The company said the 430,000 net acres that make up the non-core area hold a reserve potential of 1.5 to 3 trillion cubic feet of gas equivalent.
In its meeting with analysts, Devon said it expects production growth rates of 4 to 6 percent in 2004, about the same level as 2003. The company said it should average this year around 657,000 barrels per day of oil equivalent and replace 300 percent of its reserves.
The company also said it increased 2003 capital spending by $300 million to $2.4 billion, and expects to spend about the same amount in 2004. Thirty-six percent of 2004 spending will go to the U.S. onshore, 29 percent to Canada, 23 percent to the Gulf of Mexico and 12 percent to international.
Devon said operations should generate between $3.6 billion and $3.8 billion in cash flow in 2003.
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