HOUSTON—Devon Energy Corp. sees a tremendous future for natural gas around the world, but the company isn’t rushing to become a huge supplier to the global LNG market.

Speaking during the CERAWeek by S&P Global conference, Devon President and CEO Rick Muncrief said the Oklahoma City-based company anticipates moving about 10% of its gross gas volumes into the LNG market as a good first step.

“For us, the wrong thing to do would be to go into LNG in a big way real quickly,” Muncrief said. “I don’t think that’s the right call for us.”

Muncrief expects Devon’s production portfolio to have a gassier mix over the coming decades. But Devon still views itself as an oil company, with 80% to 90% of the company’s revenues stemming from oil, CFO Jeff Ritenour said in Devon’s fourth-quarter earnings call in February. 

Devon is producing around 650,000 boe/d, about half of which is crude oil, Muncrief said. A quarter of the company’s production, or around 150,000 bbl/d, is NGL, while the remaining quarter is gas.

Tudor, Pickering, Holt & Co. forecasts have Devon producing 323,700 bbl/d and 665,000 boe/d during 2023. Next year, oil production is expected to rise slightly to 329,000 bbl/d, while overall production should rise to 688,000 boe/d, per TPH data.

“Our strategy is to stay as oily as we can for as long as we can, and we know we will transition over time,” Muncrief said.

Devon entered into a non-binding LNG export agreement with Delfin Midstream Inc. last September. The heads of agreement set the framework to finalize a long-term plan for 1 million tons per annum (mtpa) of liquefaction capacity in Delfin’s first floating LNG vessel. 

The agreement also gives Devon the ability to add another 1 mtpa of liquefaction capacity in Delfin’s first floating LNG vessel or future vessels. 

Last year, federal regulators gave Delfin LNG more time to place the onshore portion of the proposed floating LNG project into service. Each vessel is expected to cost around $2 billion. 

Devon sees gas prices dropping in 2023 compared to 2022 due to limited LNG export capacity coming online this year, rising U.S. gas production and sufficient storage levels, the company said in its latest annual report.

The U.S. Energy Information Administration’s most recent forecasts have Henry Hub gas spot prices averaging about $3/MMBtu this year, down over 50% from $6.42/MMBtu in 2022. 

E&Ps eye LNG opportunities

Earlier this week, Chesapeake Energy Corp. announced an agreement with trading house Gunvor Group Ltd. to supply up to 2 million mtpa of LNG over a 15-year period. Oklahoma City-based Chesapeake plans to source the gas from its assets in the Haynesville Shale.

With first delivery targeted for 2027, the heads of agreement moves Chesapeake closer to receiving premium overseas pricing for its Haynesville gas.

EOG Resources Inc. also sees future demand for LNG as a major driver of its gas strategy. The Houston-based company plans to produce between 1.67 Bcf/d and 1.81 Bcf/d of natural gas this year, up approximately 245 MMcf/d at the midpoint compared to 2022 volumes.

Around half of EOG’s gas production growth this year will come from its emerging Dorado gas play in South Texas, while the other half is expected to come from the company’s sizable position in the Delaware Basin. 

EOG is exposed to 140 MMBtu/d of LNG linked to premium international pricing through a supply agreement with Cheniere’s Corpus Christi Liquefaction LLC. Under an amendment to the agreement last year, EOG’s exposure to LNG linked to international pricing will rise to 420 MMBtu/d with Cheniere’s Stage 3 expansion coming online in 2025.

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