While energy will be in demand for years to come, its forms and efficiencies in production and delivery will evolve over time.
“We think about energy beyond oil and gas,” Clay Gaspar, Devon Energy executive vice president and COO, said during Hart Energy LIVE’s Super DUG event on May 22. “Energy is energy.”
But, he said during the “Advancing Opportunities in the Lower 48” session, every form of energy has benefits and costs.
“The question is how to maximize the benefits and how to minimize the costs,” he said.
Devon “strongly, strongly” believes that energy “is not going out of style. There is no immediate substitute for products we supply today that we make that support the quality and quantity of life around the planet,” Gaspar said.
Devon has a focus on making sure it can supply some of that energy through 2040 and beyond.
“We're thinking about 2040 and how do we make sure that we're prepared for it. So why are we thinking about 2040 when everybody ‘knows’ that there's not going to be any oil production in 2030. They’re going to turn off all the wells and we're going to flip a switch magically,” he said.
The Energy Information Administration’s International Energy Outlook 2021 suggests much of the projected increase in energy consumption through 2050 will be met with liquid fuels and renewable energy sources.
“Energy is energy.”—Clay Gaspar, executive vice president & COO at Devon Energy
While Devon Energy's future could include offshore and international endeavors, its presence is grounded in the Williston, Powder River, Delaware, Eagle Ford and Anadarko Basins. The Anadarko, he said, has “tons of running room,” while the Delaware is Devon’s “crown jewel.” Powder River is an early life development while Williston and Eagle Ford are more mature.
No matter whether a well is early or late in life, recovery factors matter.
"We should be ashamed as an industry about the very puny recovery factors we have," Gaspar said.
When Devon is thinking about improving recovery factors, he said, refrac results, with their potentially phenomenal returns, are a go-to approach.
“When you already have the land leased, you already have the infrastructure built, you already have the well drilled, the incremental economics can be really phenomenal. So we see roughly the 50% uplift in some of these wells” and an incremental 50% of recovery on the refracs, he said.
Such economics compare “quite favorably” with new well construction, Gaspar added.
Devon is also seeing “a tremendous amount of opportunity just in restimulating under-stimulated wells that were earlier in the development cycle,” he said.
Some of the company’s resources are earlier in life.
“Exploration is a different mindset,” he said. “It’s more blue sky, more ‘What if?’ You’re kind of freed up from the grind of having to deliver production today when you have the freedom to think, ‘How could we do this? How big could this be?’”
Then again, some of the exploration opportunities exist, but are not followed.
Devon, for instance, has reserves “underfoot” that the company is not pursuing, such as deeper, gassier Wolff Camp reservoirs because there isn’t currently room for more gas in the Permian, he said.
And whether oil prices are at $120/bbl or $60/bbl, Gaspar said Devon works to remain consistent in its operations to avoid disruptions.
“Our business model is about consistency and not yoyo-ing” from lots of rigs to just a few rigs operating in response to changes in oil prices, he said.
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Hot rocks
Long-term, the energy mix is expected to evolve, and geothermal could play a significant role in the future of energy, he said. In April, Devon invested $10 million in Houston-based Fervo Energy, a geothermal firm.
It was, he said, an investment that made sense to an oil and gas company because Fervo also drills and completes wells, builds surface facilities, distributes product and markets it. Basically, he said, similar core competencies to Devon.
“That is something we can very much get our heads around,” he said.
And as geothermal shifts to horizontal wells, Devon has something it can contribute.
“Drilling horizontal wells, we’re like, ‘oh, high temperature, high pressure. Deep. Long laterals.’ That's what we do every single day,” he said. “There was a really interesting marriage or alignment.”
And while this investment is not expected to “move the needle” in the short-term, it puts Devon in the geothermal game now and helps the operator start thinking about an energy source that could become a material part of the business in years to come.