Devon slashes capex for 2016 by 75%, plans to trim workforce by 20%

Devon Energy Corp., Oklahoma City, plans capital expenditures in 2016 of $1.17-1.45 billion, down from $5.26 billion in 2015. That includes the firm’s exploration and production capital investment for 2016, which is estimated to range $900 million-1.1 billion, also a 75% decrease from that of 2015.

The expansive cuts come with a 20% reduction of its employee headcount—or 1,000 employees not including an additional 600 that may be impacted by divestitures—bringing its total workforce reduction over the past 12 months to more than 25%.

The firm reported a 2015 net loss of $14.5 billion, compared with earnings of $1.6 billion a year earlier. During the fourth quarter, it posted a net loss of $4.5 billion, compared with a loss of $408 million in 2014.

Devon this week reported the appointment of Tony Vaughn as chief operating officer, where he moves over from executive vice-president of exploration and production (OGJ Online, Feb. 17, 2016). The move is part of a management shuffle that includes the retirement of Darryl Smette, executive vice-president of marketing, facilities, pipeline, and supply chain.

As part of the company’s reshuffling over the past year, Devon in December agreed to acquire 80,000 net acres in the Anadarko basin STACK play from Felix Energy LLC for $1.9 billion, and 253,000 net acres in the Powder River basin for $600 million (OGJ Online, Dec. 7, 2015). Both deals are now complete.

At the time the deals were made, Devon said that it’s targeting $2-3 billion in midstream and upstream divestitures in 2016. The company says it’s currently negotiating a sale for its 50% interest in the Access pipeline, which services Devon’s thermal heavy oil operations in Canada. A sale is expected to be announced in the first half.

Devon’s upstream divestitures will include up to 80,000 boe/d of production from properties in the Midland basin, East Texas, and Midcontinent region. Assets within those regions include 15,000 net undeveloped acres in Martin County, Tex., the southern Midland Wolfcamp, Carthage, Granite Wash, and the Mississippi-Lime.

The firm expects companywide production in 2016 of 597,000-634,000 boe/d, including 249,000-264,000 b/d of oil, 117,000-127,000 b/d of natural gas liquids, and 1.39-1.46 MMcfd of natural gas.

That’s compares with companywide production of 680,000 b/d in 2015 and 673,000 b/d in 2014, including oil output of 275,000 b/d in 2015 and 214,000 b/d in 2014, NGL output of 136,000 b/d in 2015 and 139,000 b/d in 2014, and gas output of 1.61 MMcfd in 2015 and 1.92 MMcfd in 2014.

Devon’s estimated proved reserves of oil, natural gas, and NGLs were 2.2 billion boe at Dec. 31, 2015, with proved developed reserves accounting for 83% of the total.

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