US oil and gas producer Devon Energy expects capital expenditure will be lower in 2024 due to falling costs in the shale patch, while production will be relatively flat.
"We haven't put our final budget together but we're really thinking we're going to be spending a little bit less next year because we are seeing some deflation," chief executive officer Rick Muncrief said in an interview in Oklahoma City, Oklahoma, on Monday.
Muncrief cited some softening in day rates for drilling rigs, as well as lower steel costs.
With stocks for oil and gas companies still trading at a discount to other sectors, no let-up is expected in a relentless focus on capital discipline, with excess cash being funneled into higher shareholder returns rather than growth. That is a far cry from just a few years ago when a debt-fueled spending splurge ended up crashing the sector.
"What happens is that you look in the rearview mirror and you realize that, wow, we didn't create a lot of value, and we wish we would have been a little more disciplined," Muncrief said on the sidelines of the inaugural American Energy Security Summit. "And so we've learned our lesson, I'm convinced."
With oil prices back on their way up to $100/bl, that could translate into some near-term stronger cash flow, but shale producers are unlikely to be tempted to ramp up drilling.
"It's a very backwardated curve — maybe $90 this week or $100 — but what the curve is telling you is that 12 months out, it's $80 or $75 two years out," Muncrief said. "That's what prevents companies from deciding that it's time to start growing again."
The US Energy Information Administration forecasts record US oil production this year and next, buoyed by higher prices and improved well productivity.
Muncrief sees the potential for "very modest increases" in overall US oil output in 2024, perhaps in the order of 200,000-300,000 b/d.
By Stephen Cunningham
https://www.argusmedia.com/en//news/2492989-devon-energy-to-spend-less-next-year-as-costs-fall?backToResults=true
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