Devon Ready to Boost Drilling, Spending If Oil Prices Keep Climbing
HOUSTON, May 4 (Reuters) - Devon Energy Corp will ramp up drilling and spending if oil prices continue to recover, executives said on Wednesday, joining a growing list of companies expecting an increase in activity as the commodity price picture improves.
The Oklahoma City-based oil and gas driller could start adding incremental drilling activity if oil prices hit $50 a barrel and could double capital spending if they reach $60, Chief Executive Officer Dave Hager told investors on a conference call to discuss first-quarter results.
It would "probably take $60 oil or more to really get back to a capital spend level of close to $2 billion versus a $1 billion, where we're at now," Hager said.
His comments come after rival producers Pioneer Natural Resources Co and Whiting Petroleum Corp said they could see a ramp-up of drilling and fracking, contributing to a growing consensus that a price rise above $50 could fuel a resurgence in the U.S. shale industry.
U.S. oil prices have rebounded since hitting a trough just above $26 per barrel in February, and traded above $43 on Wednesday.
Devon shares slid 7 percent to $30.47.
Devon had said it expected its 2016 oil output to exceed expectations by as much as 3 percent, even without additional capital spending.
The company has also taken advantage of the recent price spike to hedge 25 percent of its expected 2016 oil output, using a "collar" strategy to guarantee a price floor of $39 a barrel and see benefits from spikes above $44 a barrel.
Hager said the company had recently changed its hedging strategy, hedging some output each quarter on a "consistent programmatic basis" as far forward as six quarters, rather than relying solely on "opportunistic" hedges as it has historically.
Devon, which is active in the oil sands of Alberta, Canada, said operations were unaffected by the wildfires that swept the Fort McMurray area on Tuesday and Wednesday, prompting the evacuation of 88,000 people.
The company posted a loss of 53 cents per share, excluding items, in the first quarter, less than analysts' consensus estimate of 64 cents. Revenue of $2.1 billion was below expectations of $2.6 billion.
(Reporting by Luc Cohen in New York; Editing by Jeffrey Benkoe)
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