Sumitomo shale deal with Devon turns sour, also to close Australian coal mine Sep 29 2014, 10:24 ET | About: Devon Energy Corporation (DVN) | By: Carl Surran, SA News Editor Sumitomo will set up a special investigation into how it lost nearly $1.8B in Texas shale oil and Australian coal mining, after writedowns connected to the investments almost completely wipe out its full-year earnings forecast. Most of the losses were incurred at the shale oil project it shares with Devon Energy (NYSE:DVN); in 2012, Sumitomo paid DVN $340M for 30% of the project in the Permian Basin, agreeing to supply another $1B to fund most of the cost of drilling wells, but now it says it wants to sell most of its share since it is “difficult to extract the oil and gas efficiently."
Sumitomo is not the first Asian company to lose their shirt investing in US unconventional JV operations (and the core of the Devon deal was the Cline). Osaka totally bombed out in their deal with Cabot for S Tx Pearsall Shale rights.
IMO, however, Sumitomo has no reason to need an inquiry - the risks associated with O&G exploration especially in unconventional reservoirs are widely known so they should have entered into this with eyes wide open.
Sounds like scape goat hunting to me
its not the first time Devon has sold a piece of its pie in the cline shale; also its not discouraging just means it will take longer for them to get the oil out of the ground, just hope we will still be young enough to really enjoy it!
Not surprised, I heard over a year ago from ex-Devon employees that they were selling off as much as they could because it wasn’t turning out to be what they projected. I was also told this information was known during the time all of the “Dog and Pony Shows” were being presented to the citizens. I think I actually posted this over a year ago in this forum.
The whole Devon / Cline shale situation underscores the fact that not all plays work all the time across an area. No doubt oil is there but the economics don’t work under today’s O&G pricing.
There was no jumping down the throat, this was passing down information. Believe me I’m just as interested in SOMEONE/ANYONE drilling in the area, I have over 20,000 acre rights and hardly any progress, so extremely disappointed but not holding my breath. After multiple Devon employees told me the same thing, I put Mitchell county at the back of my mind, so not to be discouraged.
What size pumping unit are they going to put on 1-H Three Span well ? Probably 3 or 4 weeks before water is recovered , Guessing !
Figure that they will be recovering some water (mix of frac fluid and any formation water) for some time. Very common
MAPACHE 3 UNIT update:
W2 is out.
450 barrels of oil per day 414 MCF gas per day
j,
Thanks for the update. That sounds good for Mitchell County and that area. DRILL BABY DRILL
Clint Liles
oops Clint, I didn`t realize you had already sent the link
Mickie,
They havent started it yet. Ill try to post it when the rig goes up.
Have they started drilling the second mapaches north of that one, it is permitted in scurry co. But crosses into Mitchell?
j,
I sent it after your post. Thanks.
Clint Liles
Just to temper things a bit about the IP on the Mapache well, but note that this well was also making over 1300 BW per day while on a large (2") choke while “flowing” with zero pressure.
The large choke will most probably not be maintained overtime - smaller choke equals smaller rate. Plus the high water volume may be tied to frac fluid being produced during flush post frac flow period.
The zero pressure while flowing isn’t possible - may be mistake in filing but this raises some questions as to the rate / well potential.
The biggest issue to keep in mind here is the production decline over time that will take place on this well. Frac’d wells will normally start off at high rates and then drop - the question is how fast will the drop me.
Good news that a second well is being drilled and hope that results and production continue to be positive
You can count on Rock Man to try and ruin an optimistic conversation.
Some folks like to consider their glass half full.
I just try to point out all the facts and make sure readers are aware of issues that impact well performance.
As to J Richardson’s post, the trenching is almost certainly tied to gas pipeline hook operations. Pump jack / artificial lift is to be expected - very typical of these types of reservoirs.
Just checked the Tx RRC site for this operator for this well (Operator # 857911).
August 2014 (a partial month based on all that we know) shows 6942 BO produced along with 3041 MCF flared.
September numbers (out early in November) will be interesting!