Larry Nichols, who helped found Oklahoma City-based Devon Energy and oversaw its purchase of Barnett Shale pioneer Mitchell Energy in 2002, will retire Dec. 31, the company said in a regulatory filing. The Oklahoman has a report here.
Chesapeake Energy has overtaken Devon Energy as the largest producer in the Barnett Shale, at least through the year's first seven months, according to Texas Railroad Commission figures. (See note below.) Devon was long the leader, owing to its 2002 purchase of Barnett pioneer Mitchell Energy. But in July, Chesapeake edged out Devon in production during 2012, 285.6 billion cubic feet to 284.6 bcf. XTO Energy is third at 170.3 bcf. A link to the Railroad Commission's Barnett Shale data page, which has data on permits, wells and the top 10 producers, is here.
Editor's note: Since publishing this, we've heard from Chesapeake and Devon, who both questioned the Railroad Commission's rankings. Chesapeake says they have determined that their production is correct, but Devon has its doubts and is checking. We'll post an update when we're sure about who's No. 1 in the Barnett Shale.
Natural gas producers saw their third-quarter earnings statements generally turn into loss reports, often on account of taking "impairments" -- write-offs in the value of holdings in the wake of low product prices. The Star-Telegram has an explainer on the accounting of impairments here.
Devon Energy, the largest producer in the Barnett Shale, said it lost $719 million in the third quarter after taking a $1.1 billion impairment on assets, a common action among independent producers following the decade-low natural gas prices seen in the summer. After adjusting for that and other one-time items, the Oklahoma City-based company earned $355 million, or 88 cents a share. Financial analysts were expecting an adjusted 69 cents, but the company's shares were down about 8 percent Wednesday on a day when shares overall were weak, particularly energy stocks. Devon also booked $533 million in cash from its joint venture agreement with Sumitomo.
Devon Energy's consolidation of jobs at its towering Oklahoma City headquarters has "no impact" on employment in the Barnett Shale, a company spokesman says. Devon on Thursday announced it would close its Houston office and relocate exploration and development personnel from South Texas, East Texas and Louisiana. The company is the largest producer in the Barnett Shale and employs more than 400 people in the field, centered around its Bridgeport processing plant and offices.
The Houston Chronicle reported that the move affects about 500 Houston workers. "Consolidating our U.S. operations will improve our ability to quickly shift the focus of our workforce between project areas as economic conditions dictate," Dave Hager, Devon's executive vice president of exploration and production, said in the company's announcement. "In addition, this move will improve the sharing of best practices and enhance overall operational efficiency."
Crestwood Midstream Partners says it agreed to buy gathering and processing assets in the liquids-rich southwestern area of the Barnett Shale from Devon Energy for $90 million. Houston-based Crestwood and Devon, the largest producer in the Barnett, inked a "20-year, fixed-fee gathering, processing and compression agreement under which Crestwood will gather and process Devon's natural gas production" from 20,500 acres that currently produce 95 million cubic feet a day. The deal should close in the third quarter.
Assets include a 74-mile low-pressure gathering system, a 100-million cubic-feet-a-day cryogenic processing facility and 23,100 horsepower of compression equipment in western Johnson County built since 2006. It's all adjacent to Crestwood's Cowtown gathering system purchased in 2010 from Quicksilver Resources, which includes two natural gas processing plants totaling 325 million cubic feet a day of capacity. "Upon closing, Crestwood is expected to consolidate the systems by increasing the system interconnect capacity with the ultimate goal to process all of Devon's West Johnson County natural gas production in Crestwood's Cowtown and Corvette processing plants," Crestwood said.
Even as drilling activity has plummeted in the Barnett Shale from 2008's highs, rigs continue to work in the oil window of the big North Texas field. EOG Resources started it, but more companies are looking for oil and valuable condensate in an area that made its name in natural gas. The Star-Telegram takes a look at the play in Montague, Wise and other counties in the northwest reaches of the field. The story is here.
Devon Energy, the largest producer in North Texas’ Barnett Shale, said today it is seeking a joint venture partner to develop shale oil and natural gas formations in several states. In a conference call with financial analysts following its third-quarter earnings release, CEO John Richels said the Oklahoma City-based firm would prefer one partner to participate in the development of 1.2 million acres in leases it holds in Oklahoma, Michigan, Louisiana, the Utica Shale in Ohio and the Niobrara deposit in Wyoming and Colorado. He said Devon has a well in each area and plans 40 new wells soon.
It’s possible Devon could raise $1.8 billion selling just a one-third stake in those properties, based on comparable deals, Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, told Bloomberg News today.The company is hardly cash-poor. It reported $6.8 billion in cash and equivalents as of Sept. 30, the product of big overseas asset sales last year.
Analyst Phil Adams at Gimme Credit, an independent debt researcher, said Devon’s rich cash position could help it negotiate better terms if it strikes a deal. He judged the move a positive, allowing the company to reduce risk and get a faster return of cash spent acquiring the acreage.
Devon Energy, the largest producer in North Texas' Barnett Shale, said today it earned $1 billion in the third quarter, down from the $2.1 billion reported a year earlier on the strength of a big asset sale. Revenues were up 25 percent to $2.1 billion on higher production and prices for natural gas and crude oil. The most recent quarter included a $642 million non-cash gain on the value of its oil and gas hedges. After adjusting for unusual items, Oklahoma City-based Devon earned $638 million, or $1.54 a share, topping analysts' consensus estimate of $1.47. The company's shares (ticker: DVN) were up about 6 percent in early trading.
Devon said total production of natural gas, natural gas liquids and crude oil rose 8 in the quarter to the equivalent of 661,000 barrels a day. That included a 17 percent rise in oil and natural gas liquids, which command better prices than natural gas in the market. Barnett Shale production was up 8 percent to the equivalent of 1.3 billion cubic feet a day, which includes 46,000 barrels a day of liquids, up 15 percent from a year earlier.
For U.S. energy producers, high-priced $11 natural gas is “kind of like a Saturday night drunk,” Devon Energy Executive Chairman Larry Nichols said at the opening session of the Unconventional Gas International Conference and Exhibition on Tuesday afternoon. “It may feel good at the time,” he said, but it isn’t a sustainable high.
Just as an $11 price is too high to persist, today’s current market prices of about $3.75 are too low for the industry to thrive and maintain strong natural gas production in the long term, said Nichols, who stepped down this year from his longtime position as CEO of Oklahoma City-based Devon, the leading producer in North Texas’ gas-rich Barnett Shale.
Even in the face of low gas prices, domestic energy producers have continued to do substantial drilling, particularly in major unconventional gas plays such as the Barnett, the Eagle Ford Shale in South and Central Texas, the Haynesville Shale in Louisiana and East Texas, and the Marcellus Shale in the Appalachian regionof the eastern U.S.
By continuing to drill despite weak prices, “we’ve been ignoring the free market,” Nichols said. But today’s depressed prices represent “the free market ... sending us a very powerful signal” that there is an oversupply of gas, he said.