A “first of its kind” is helping Devon Energy turn huge profits on its Delaware Basin operations that are considered the company’s “growth engine” of the Permian Basin,
The first of its kind? The company’s own sand mine. Located in Loving County, Texas, a county located at the south edge of the state line with New Mexico, the Devon-owned mine is located on surface acreage the company owns in the county according to Clay Gaspar, Devon’s Executive Vice President and Chief Operating Officer.
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During a conference call held this month after Devon released its first quarter 2022 earnings report, Gaspar spoke of the sand mining operation and its contributions toward cutting expenses for the oil and gas company.
He called it a “catalyst that will help us combat higher cost environment.” Gaspar also said it is so successful in fighting supply chain issues that the company is exploring similar operations in Oklahoma and Wyoming.
“This mobile sand mine is the first of its kind in the Delaware Basin and is expected to supply up to 25% of our proppant requirements in the basin this year,” explained Gaspar.
“In addition to providing a certainty of supply, this mine could save us up $200,000 per well, relative to the rising spot prices we are experiencing across the basin as activity picks up and sand supply has tightened.”
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Gaspar said it not only is saving money for the company on a per-well basis, but it has significant environmental and safety benefits because there is a need for fewer trucks on the road. It also eliminates the combustion-related emissions associated with drawing the sand that occurs in normal mining processes.
“With the early success from this project, we are excited about the potential to expand this concept to other areas of our portfolio with opportunities already identified in both Anadarko and the Powder River Basins. This innovative approach to sourcing sand for our completion operations serves as another great example to our team’s drive for continuous improvement.”
Gaspar said controlling the critical baseline of supply in the proppant sand market is incredibly valuable to the company.
“This creative solution to the current supply chain crunch is another benefit from an investment we made a purchase of 15,000 acres of surface land in the Stateline field in 2018. With the early success from this project, we are excited about the potential to expand this concept to other areas of our portfolio with opportunities already identified in both Anadarko and the Powder River Basins,” said Gaspar in his presentation to investors and analysts.
The mobile sand operation was an obvious critical element to Devon’s production in the Delaware where net production in the first quarter increased 27% on a year-over-year basis. The growth, according to Gaspar was driven by 52 high-impact wells brought online across targets in the Avalon, Bone Springs and Wolfcamp formations.
The wells in question had 30-day averages of 2,800 Boe per day with an average of 60% oil production. The average completed well cost was around $7.5 million per well and most are reported to be on track to pay out in less than a year.
Gaspar told investors that Devon even saw massive improvements in its drilled and completed feet per day metrics.