Devon Energy Resuming Offshore Operations
Devon Energy has restored a portion of the offshore oil and natural gas production that it had suspended in preparation for Hurricane Rita. Devon produced approximately 80,000 equivalent barrels of oil (Boe) per day from wells located in the Gulf of Mexico prior to Hurricane Katrina. This represented about 13 percent of Devon's worldwide production. All of the company's Gulf of Mexico production was suspended prior to Hurricane Rita.
Currently, about 30,000 Boe per day of Devon's offshore production has been restored. Restoration of the remaining volumes, including 9,000 Boe per day suspended due to Hurricane Katrina, is dependent upon further damage assessments and repairs to Devon and third-party-operated facilities.
Additionally, shut-downs of pipelines and third-party gas processing facilities in preparation for Hurricane Rita caused Devon to suspend a portion of its onshore production. Devon's onshore production has now been restored to pre-storm levels.
The company also provided an estimate of the impact of Hurricanes Katrina and Rita to its production for the quarter ending September 30, 2005. As a result of the two storms, Devon expects to report company-wide production of about 54.6 million Boe in the third quarter. This is 1.4 million Boe less than the company's pre-Katrina forecast of approximately 56 million Boe. Onshore volumes represent approximately 0.3 million Boe of the 1.4 million Boe reduction to the third quarter forecast. Approximately 60 percent of the 1.4 million Boe reduction is natural gas.
Devon is insured against physical damage to its offshore facilities caused by the hurricanes. Its insurance program also includes substantial business interruption coverage which Devon will utilize to recover costs associated with the suspended production. Business interruption insurance is subject to a standard waiting period, upper limits to oil and natural gas prices and a per event maximum.
"Our employees carried out Devon's evacuation and shut-in procedures quickly and safely," said Stephen J. Hadden, senior vice president, exploration and production. "It also appears that the offshore drilling and workover rigs under contract to Devon are undamaged and returning to service."
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