Extended maintenance outage dents production at Jackfish

Extended maintenance outage dents production at Jackfish

Devon Energy says second quarter production out of its Jackfish oil sands in-situ facility was negatively impacted by a maintenance turnaround, which reduced output by 15,000 bbl/day in Q2. The company says it identified additional maintenance requirements during the turnaround, extending the shutdown into July.

Production averaged 97,200 bbl/day in the second quarter, down from 116,700 bbl/day in Q1. Output is expected to average closer to 100,000 bbl/day in the third quarter, reaching peak production rates sometime in Q4.

LOCATION MAP COURTESY DEVON ENERGY

The Jackfish complex is divided into three phases, using steam-assisted gravity drainage (SAGD) to extract bitumen. All three phases have a nameplate capacity of 105,000 bbl/day of heavy diluted bitumen, forming part of the Access Western Blend, along with MEG Energy.

Devon says the SAGD operation is expected to generate "significant" free cash flow this year since 50% of production is hedged at a US$15 discount to WTI. Assuming a WTI price of US$65/bbl, free cash flow from its Canadian heavy oil assets, which include the Lloydminster property, are estimated at about US$500 million. Devon says it is on track to pay off the capital costs of Jackfish 2 sometime next year.

Q2 production expenses at Jackfish were negatively impacted by a $21 million charge associated with the maintenance turnaround. The company also says royalty payments increased by 2% due to higher oil prices.

Jackfish is Devon Energy's first commercial SAGD facility, which achieved first-oil in 2007. The company has a 100% working interest in Jackfish and 50% stake in the undeveloped Pike leases. Devon's Canadian operations account for about one-quarter of its total output.


SOURCES:
DEVON ENERGY • SECOND-QUARTER 2018 RESULTS • JUL 2018
DEVON ENERGY • Q2 2018 OPERATIONS REPORT • JUL 2018
DEVON ENERGY • INVESTOR PRESENTATION • JUL 2018
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