Devon Energy Corp (DVN.N) will spend $1 billion more than originally planned this year on acreage acquisition and exploration in shale basins that produce oil and more profitable natural gas with a high liquids content, the company said on Wednesday.
Devon, like most other U.S. exploration and production companies, is shifting capital away from natural gas drilling as prices for that fuel are at a decade low. Energy companies are instead targeting crude oil trapped in rock-like shale and natural gas that can be stripped of valuable liquids like propane.
"We're very confident that there are a lot of oil and liquids-rich opportunities to be found in North America," Dave Hager, Devon's head of exploration and production, told analysts.
In addition to previously announced exploration plans in emerging basins like the Utica Shale in Ohio, Devon said it has amassed 500,000 acres in the Cline shale in West Texas that holds oil.
Devon is also targeting oil on another 250,000 acres in an unspecified location, and the company hopes to increase that position to 500,000 acres, Hager said in remarks broadcast over the Internet.
Devon said it may pursue a joint venture for its Cline shale acreage, similar to its $2.5 billion deal with Sinopec that gives the Chinese oil company a one-third stake in five developing oil and gas formations.
The Oklahoma City, Oklahoma, company now plans to spend $6.1 billion to $6.5 billion this year, up $1 billion from its original budget.
Devon has no plans to use its $7.1 billion cash pile on a large acquisition as some have speculated, said John Richels, the company's chief executive officer.
Richels said he and other executives at Devon have not spent any time thinking about a big acquisition. Instead, the company's cash will be invested in exploration and production projects, he said.
Most of the cash represents proceeds from the sale of Devon's international assets in Brazil and elsewhere. The funds will be held offshore until there is "some sort of resolution on the repatriation tax issue," Richels said.
Devon expects to increase its oil and gas production by 6 percent to 8 percent on an annual basis over the next five years, the company said.
Devon, which currently has onshore operations only in North America, said it may sell some of its Canadian exploration assets if it cannot achieve the scale it needs from those projects. That would not include the company's oil sands operations.
Shares of Devon were up 4 cents to $71.19 in Wednesday afternoon trade on the New York Stock Exchange. That compares with a 2.5 percent decline in the SIG Oil Exploration and Production Index .EPX.
(Reporting By Anna Driver in Houston; Editing by Maureen Bavdek, Matthew Lewis and John Wallace)