MOSCOW (MRC) -- Devon Energy has agreed with chemicals major Dow to jointly develop a portion of Devon’s STACK oil and gas acreage in central Oklahoma, said US energy company.
Under the agreement, Devon will monetise half of its working interest in 133 undrilled locations in exchange for about USD100m, over the next four years, it said.
"Devon’s returns associated with this agreement are expected to be enhanced by lower well costs from focused infill development drilling and midstream incentive rates that lower per-unit operating costs for each new well brought online," it added.
"Dow is a world-class organisation and this mutually beneficial agreement will help us bring forward value in the STACK, while delivering carry-enhanced returns that compete effectively for capital within our portfolio," added Devon CEO Dave Hager.
Devon anticipates no change to its production targets or capital spending outlook in 2020 as a result of this agreement. Activity in 2020 will start with the development of two drilling units in northern Canadian County, where drilling operations are expected to commence mid-year.
With this agreement, Devon will retain 100 percent of its production and cash flow from existing operations in the STACK play. Devon will serve as operator and is responsible for capital allocation and project timing with this agreement.
Vinson & Elkins LLP acted as legal advisor to Devon. Latham & Watkins LLP acted as legal advisor to Dow.
As MRC reported before, Dow Chemical's propylene dehydrogenation (PDH) unit in Freeport, Texas, was offline in October - November, 2019, for a turnaround, said US olefin market participants. Sources said the PDH unit went offline for scheduled maintenance September 26, and the work was expected to last 45-60 days. Originally, sources expected the turnaround to begin in early September, but then learned it had been delayed.
Propylene is a feedstock for the production of polypropylene (PP).
According to MRC's ScanPlast report, Russia's overall PP production rose to about 1,163,200 tonnes in the first ten months of 2018, up by 1.3% year on year. Three producers out of seven reduced the capacity utilisation.
The Dow Chemical Company is an American multinational chemical corporation. Dow is a large producer of plastics, including polystyrene, polyurethane, polyethylene, polypropylene, and synthetic rubber.
Devon Energy Corporation is a leading independent oil and natural gas exploration and production company. Devon's operations are focused onshore in the United States.
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