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Devon Energy: Restimulating Barnett Wells To Protect Production Base

Devon Energy's vertical restimulation program in the Barnett shale is economical, especially after factoring in its hedging program.

By the end of 2015, Devon will have restimulated 60% of its existing vertical Barnett wells.

Devon is testing out horizontal restimulation efforts in the Barnett play to see if it can leverage its huge existing horizontal well portfolio as well.

The Barnett shale represents 27.5% of Devon Energy's company-wide production base.

Back in 2001, Devon Energy Corporation (NYSE:DVN) agreed to buy Mitchell Energy for $3.1 billion. This gave the company a significant foothold in the natural gas weighted Barnett shale play, which was discovered in the 1950s but wasn't considered economical until the 1980s due to improvements in well stimulation technology. The C.W. Slay #1 well [drilled in 1981] marked the beginning of George Mitchell's Barnett legacy, as Mitchell Energy started using hydraulic fracturing to open up the play.

From 1981 onward, Mitchell Energy continuously tested out new techniques to enhance well productivity, a process that completely transformed the play [and ultimately the oil & gas industry itself, especially once horizontal drilling got involved]. Drilling activity was limited in the 1980s, with 63 wells drilled from 1981 to 1989. Starting in 1990, another 200 wells were drilled in the Barnett play through 1994. That continued to be ramped up during the second half of the 1990s to 365 wells, particularly because Mitchell Energy started using slick water fracs in 1997 and restimulation efforts in 1999.

When horizontal drilling was brought to the region in 2003, drilling activity exploded. From 2003 to 2007, roughly 5,000 wells were drilled in the Barnett shale. The rise of the Marcellus and Utica shales put an end to the Barnett drilling bonanza as domestic natural gas prices plummeted, making it uneconomical to drill new Barnett wells. Back in October 2008, there were around 200 rigs actively developing the Barnett play. As of this October, there are now only six active rigs.

Since buying Mitchell Energy, Devon Energy has built up an inventory of 1,900 vertical wells and over 3,000 horizontal wells across its 620,000 net acre position in the Barnett shale. Those wells produced an average 185,000 BOE/d net from the region during the second quarter of 2015. That's equal to 27.5% of Devon Energy's company-wide production base, making it a significant part of its operations. For comparison, Devon Energy pumped out 674,000 BOE/d on average in Q2 2015.

Devon's Barnett shale production fell from 212,000 BOE/d in Q2 2014 to Q2 2015, as current natural gas prices make drilling a new Barnett well uneconomical in most locations. With none of its rigs operating in the area, Devon is seeking to protect its output streams through...