Devon has developed a plan to ensure access to markets for their gas through investments in the Pin Oak export terminal in Corpus Christie and the buy-in for the proposed FLNG tanker with Delphin. Something we discussed in anlast year. In the Q-4 analyst call, CEO Muncrief commented on how Devon's strategy has evolved to ensure their gas has access to multiple markets and liquids are priced against Brent.
These acreage pick-ups also provide the ability for refracs and adjustments in well spacing. In the refrac scenario-at a very high level, a reservoir that has been previously stimulated-technical term for fracking, is cleaned out of sand and hardware, and a modified frac is pumped to stimulate less permeable sections.
Devon plans to up average output for 2023 to range between 643-663K BOEPD, with most of growth occurring after Q-1. The first quarter is projected at 635K BOEPD, with about one half the total being oil. The slow start is due to some downtime relating to a compressor fire at Stateline that will keep 10K BOEPD offline in Q-1. Post Q-1, there will be a 15% activity ramp that is intended to drive average volumes to the upper end of the forecast range, ~660K BOEPD.
This substantial acreage footprint gives DVN considerable flexibility in capital allocation. With wells coming in like this, the capital efficiency for these wells is going to be well above average.It's been a rough ride the past few months for Devon. I think the share price has been punished out of proportion to the value the company delivers. I consider that DVN in the $50.