Devon Energy, one of the largest producers in the Barnett Shale, is slashing its drilling budget by 75 percent and laying off about 1,000 employees in an aggressive effort to protect its balance sheet and preserve assets until commodity prices improve.
About 700 employees at the company’s Oklahoma City headquarters will be affected by the layoffs, which Devon planned to complete by the midday Thursday. At its field-level offices, the company said, it expects to complete notifications by Feb. 22. All the layoffs will occur in the first quarter.
“As we look to 2016, our top priority in this environment is to protect the balance sheet by balancing spending requirements with available cash flow,” Devon President and CEO Dave Hager said in a conference call.
Devon’s drilling budget is also being crunched down to between $900 million and $1.1 billion for 2016, after oil production increased 26 percent compared with the fourth quarter last year. “We also see no reason to accelerate production growth into these weak markets,” Hager said.
Devon has a downtown Fort Worth office and field operations in the Barnett Shale, including in Wise County. Spokesman John Porretto said he could not say how many employees the company has in North Texas or how many will be affected by the layoffs.
Devon is the latest of the larger energy companies to announce cutbacks in response to declining commodity prices. Oil prices have plunged about 70 percent since the middle of 2014. Last week, Irving-based Pioneer Natural Resources, which continued to search for oil long after others shut down, said it was cutting its drilling program in half.
Earlier this year, Devon said it had hired the Jefferies Group investment bank to sell its assets to reduce debt. The company hopes to raise $2 billion to $3 billion from the divestitures.
An additional 600 employees will be affected by the sale of the noncore, upstream assets, Porretto said. But those people are expected to work for the acquiring companies.
Devon has about 600,000 net acres in the Barnett Shale and about 3,000 producing wells. In 2015, the company accelerated its refracturing program to test the restimulation of 25 wells and now has plans to refrack six wells. It is prepared to restart drilling when prices improve.
The company plans to maintain $1 billion of cash flow through operating costs and dividend reductions. Devon also cut its quarterly dividend to 6 cents for its common stock for the second quarter of 2016, from 24 cents the previous quarter.
Devon Energy (ticker: DVN) closed at $20.33, down 93 cents, or 4.37 percent.