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All In: Devon Energy is Banking on a Rebound for Anadarko

Devon Energy Corp. intends to take advantage of its position in the Anadarko Basin to drive its cash return model. The company also intends to position itself as the leader for ESG within the industry.

The reason behind this move is simple: top management at Devon believes that the Anadarko Basin is a hidden treasure.

The number of rigs has increased by 180%, and production per rig is up. Technological advancements, longer laterals, and optimized completions are driving this trend. As the company has been in Anadarko all along, Devon will continue planning for the 300,000 net acres that they currently have within this basin, while others only becoming familiar with it at the moment.

Devon is implementing its cash return model when it comes to developing Anadarko Basin, which includes five key components — moderate growth, reduced investment rates, low leverage, fixed-plus-variable dividends, and ESG excellence, which generated $550 million in free cash flow by itself in 2021 alone.

Consequently, the Oklahoma City-based independent E&P company plans to drill 45 new wells in the Midcontinent by 2022, as well as to produce 600,000 boe/d across five operating basins, including the Eagle Ford Shale, Permian, Powder River, and Williston basins.

According to Aaron Ketter, a vice president at Devon Energy, Devon's approach to technology development is long-term. It is based on a consistent allocation of capital. These policies have been in place for decades. Data access, standardization, and trust form the foundations of this system. In line with this, technology teams and field teams, as well as vendor teams, are continually seeking net-zero improvement. Right now, that means using three different sensors to monitor emissions continuously — fixed cameras, a long-range laser network, and aerial laser surveys — to catch any harmful carbon or methane emissions.

Technology advances are bringing about a step change in the transition to observed emissions reporting. Devon will also work with agencies and NGOs in this regard, to conduct research and provide external reports. A preventative phase, methane fees, and carbon tax ensure the company does not become compliant, that any leaks are discovered as soon as possible, that they are fixed quickly, and that compliance is avoided.

However, it remains to be seen whether or not this strategy will produce the necessary results. We should note, however, that Devon Energy, Corp. (DVN) shares have surged 30.7% just this year alone amid recent macro uncertainties and rising energy prices. On both the topline and bottomline, Devon's recent fourth-quarter results were better than Street estimates.

Revenue increased by 233.8% to $4.27 billion, exceeding estimates by $1.04 billion. Earnings per share of $1.39 exceeded consensus by $0.15. Production growth in the Delaware basin and an increase in margins drove this performance. As of the end of the quarter, the company's total production averaged 611 thousand oil-equivalent barrels (Boe) per day.

It appears that they are doing something right, at least for the moment.

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Merger of Equals: Whiting and Oasis $6B Deal

The two Bakken shale producers announced in a joint statement on March 7 that they had reached an agreement to unite in a $6 billion "merger of equals." Combining these two companies will create a leading Williston Basin position with assets covering approximately 972,000 net acres, production of 167,800 boe/d, and an enhanced free cash flow generation that will generate capital returns to shareholders. A historic collapse in oil prices prompted both Whiting and Oasis oil companies to file for Chapter 11 bankruptcy protection in 2020. Thus, the merger can be viewed as a preventive measure to avoid going out of business.

By purchasing the gathering and processing assets of Trace Midstream, Williams' existing footprint gains expanded capacity in one of the nation's largest growth basins, bringing its Haynesville gathering capacity to over 4 Bcf/d — increasing more than 200% from 1.8 Bcf/d. The deal also includes a long-term commitment from Trace and Quantum to support Williams' Louisiana Energy Gateway project (LEG), which is aimed to deliver responsibly sourced Haynesville’s naturalgas to markets along the Texas and Louisiana GulfCoast

Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.

The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.

Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.

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