Independent oil & gas company Devon Energy Corporation (DVN) received a nod from the Alberta Energy Resources Conservation Board and Alberta Environment and Water to move ahead with its Jackfish 3 start-up project.
Devon has 100% interest in the Jackfish oil sand project in Alberta, Canada. The success of the first two Jackfish projects has encouraged the company to pursue a third phase. With an initial investment of $1.3 billion, Devon will begin to work on this project from January 2012 with commercial production scheduled for the end of 2014.
The company has utilized the Steam Assisted Gravity Drainage (“SAGD”) technique to extract oils from these non-conventional oil sands. As per the technique, steam will be injected into the reservoir, heating up the thick oil, which then comes up to the surface.
The company expects the Jackfish 3 project to produce 35,000 barrels of oil per day before royalties, once reaching full steam. Given its total reserve of 300 million barrels of gross recoverable oil, the Jackfish endeavor is expected to consistently add to the total production of the company for the next 20 years.
The successful technique used in the Jackfish project has also prompted the company to develop other oil sand assets in Canada. The company acquired a 50% interest in the Pike oil sands field from BP Plc. (BP) in March 2010. BP Canada holds the remaining 50% interest. The Pike oil sands joint venture is adjacent to the Jackfish project. The company has plans to leverage its existing operation in Jackfish to develop the Pike oil sands.
The Pike oil sand and Jackfish projects are part of the company’s long-term production strategy. Devon expects the current production of 44,000 barrels per day from these projects to expand to a range of 1,50,000 to 1,70,000 barrels per day by 2020. Production from these Albertan oil sands accounted for 5.4% of total third quarter 2011 production.
We believe the expansion of the high quality Jackfish and Pike oil projects would grow exploration and production profitability from Canadian assets (28.9% in 2010).
Devon Energy currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
Devon Energy Corporation, based in Oklahoma City, Oklahoma, is an independent energy company engaged primarily in exploration, development and production of oil and natural gas. The company’s oil and gas operations are mainly concentrated in the onshore areas of North America, including the United States and Canada.
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