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Devon, Dow agree to $100M STACK joint venture

Devon Energy Corp. has reached a four-year, $100 million joint venture with Dow Inc. to develop Devon's acreage in the STACK play of Oklahoma, Devon announced Dec. 10.

According to a joint statement, the $100 million drilling carry will cover approximately 133 undrilled locations. Devon, which will remain the operator, said the joint venture would not only help them with the drilling carry but through reduced well costs from focused infill drilling. The joint venture will kick off with the drilling of two wells in Canadian County, Okla., likely in mid-2020.

"This innovative agreement is consistent with our strategy to optimize the capital efficiency and returns associated with our development programs," Devon President and CEO Dave Hager said. "Dow is a world-class organization 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."

While still under development, the STACK has largely proven to be a liquids-heavy play. Devon said the joint venture would allow it to continue to exploit unconventional oil formations in the area.

"We are excited to expand our relationship with Dow to develop a portion of our liquids-rich acreage in the STACK," said David Harris, Devon's executive vice president of exploration and production. "This agreement will benefit from the improvements in capital efficiency achieved in the play this year, driven by optimized infill development spacing and substantially lower drilling and completion costs."

Devon said it anticipates no changes to its production guidance or its 2020 capital budget as a result of the agreement with Dow.

Shares of Devon were up more than 2% to $23.62 on the New York Stock Exchange in late morning trading on Dec. 10.