Clay Gaspar
Executive Vice President and Chief Operating Officer at Devon Energy
Thank you, Rick, and good morning, everyone. Devon's consistent quarterly performance exemplifies the importance of balancing three things: first, the value of well-communicated, consistent, and long-term business strategy; second, a 24-plus-month planning process that details out the development schedule, supply chain, takeaway needs, and any potential pinch points; and third and critically important, near-term execution, a.k.a. getting it done.
Although third quarter was another quarter our team was working hard to deliver on all phases, all together we were able to deliver and our business continues to strengthen and build momentum. During the quarter, the team delivered results that exceeded expectations by focusing on capital efficiency and strong well productivity. In addition to the important blocking and tackling associated with our day-to-day operations, we also invested substantial amounts of effort to ensure that we integrate the recent acquisitions into the business the right way so that we can maximize the value of these assets for shareholders. The integration is not just simply teaching the new people how we do it at Devon, but taking the time to learn, challenge, and improve our own processes.
On slide 14, let's begin with an overview of our Delaware Basin operations, which account for more than 60% of our total activity and drove the overall company performance in the quarter. To optimize returns of our capital program in this tight market, we've been very thoughtful in designing a plan with steady activity levels that has resulted in an average of 14 rigs and three frac crews year to date. On the top right chart, you can see that this disciplined capital allocation in the Delaware is working well, resulting in a healthy production growth rate of 11% year to date. Importantly, the low-risk development projects underpinning this volume growth have delivered world class returns with IRRs consistent in the triple digits. Another win for us can be seen in the bottom left where the team has leveraged our substantial operating scale to maximize the value of our production. With good upfront planning and economies of scale in the basin, we've been able to effectively control operating costs even as commodity prices have gravitated much higher over the last few years. On the bottom right, this cost mitigation strategy has allowed us to materially benefit from the higher prices, with margins expanding by 260% over the past few years.
Looking specifically at the quarter's results on slide 15, the Delaware team continued to do a great job of achieving operating efficiencies. On the chart to the right, new well activity was highlighted by several high-impact development pads, but the most prolific result was achieved by the CDU 604H in southern Eddy County. This three-mile lateral was our first test of the Wolfcamp B interval in the Cotton Draw area, delivering a 30-day rate of just over 6,500 BOE per day, with estimated recoveries for this well trending towards 3 million BOE. That's not bad for a secondary target.
In addition to our outstanding well productivity, we've not seen any meaningful communication with the shallower zones in the Wolfcamp such as the Wolfcamp A or XY sands, which deepens our quality of inventory and provides us flexibility to optimize future development plans in this portion of the field. As I mentioned in my earlier comments, the strategic development of these
Target-rich assets is some of the most complicated and important work we do. Results like this give us confidence that we're getting things right.
We also made great progress advancing drilling and completion efficiencies across our operations in the basin. In the Wolfcamp, we improved drilling productivity by 13% on a per foot basis versus last quarter, with some of our best spud to rig release times for two-mile wells pushing below 20 days.
Completion efficiencies have also steadily progressed as were highlighted by a record-setting performance on our Cotton Draw pad, where our completion pace reached an average of 3,200 feet per day. While we have made a lot of progress on efficiencies over the last few years, these D&C results showcase the incremental improvements the team is making every day to reduce cycle times, refine completion designs and deploy leading-edge technology across all facets of the value chain.
Moving to slide 16. I'm also excited about the positive results we're seeing delivered in the other key assets across our portfolio. In the Anadarko Basin with our four-rig program, the team's approach of wider spacing and larger completion designs is delivering excellent results. A great example of this resource progression was the Otto development in the condensate window of Canadian County. This five-well project, which codeveloped the Meramec and Woodford formations, attained an average 30-day rate of more than 2,700 BOE per day. The strong well productivity we are experiencing, coupled with our $100 million Dow drilling carry, positions this liquid-rich gas play to compete for capital with any asset in our portfolio.
Moving to the Williston. This asset continues its tradition of delivering some of the best returns and highest oil rates in our portfolio with another batch of great wells brought online during the quarter. Coupled with the RimRock acquisition, oil production advanced 30% versus last quarter. The team is also making substantial progress integrating the RimRock acquisition into our operations. And because of this transaction, we expect volumes to take another step up to around 65,000 BOE per day by year-end. This enhanced production profile now puts our Williston asset on pace to generate around $1 billion of cash flow for this year.
Turning to the Powder River Basin. We're encouraged by the results from our Niobrara appraisal activity in the quarter. The top highlight was a three-mile lateral SSU MLT project in Converse County that helped further validate the commerciality of this spacing test. With improved completion design that pumped 3,000 pounds of sand per foot, all SSU MLT wells performed above type curve expectations with 30-day rates averaging 1,400 BOE per day, of which 86% was oil.
Importantly, we're still experiencing strong reservoir pressure and shallower declines than forecasted with per well recoveries on track to reach 1.2 million barrels of oil equivalent. While we still have a lot of work ahead of us, this positive result adds to the conviction that the Niobrara will be a repeatable resource play and an important growth driver for Devon in the future.
Lastly, in the Eagle Ford, the results from the infill and redevelopment activity across our legacy position in DeWitt County continue to demonstrate that there's a lot more oil to be recovered from this prolific play over time. During the quarter, we brought on eight new infill wells bounded by existing producers that delivered 30-day rates averaging 3,200 BOE per day.
Slide 17 provides more detailed overview of our recent Validus acquisition. This opportunistic acquisition doubles the scale of our position in the Eagle Ford and captures a repeatable resource play in the best part of the Karnes Trough oil window. As you can see on the map, the transaction secures an operated position of 42,000 net acres with high working interest in the 90% that's adjacent to our existing footprint in the play. The oil weighted production mix of around 35,000 BOE per day provides strong cash operating margins through access to the premium Gulf Coast pricing, low per unit operating and GP&T cost of around $6 per BOE. With enhanced scale in the basin, we expect to realize $50 million in average annual cash flow savings from the capital efficiencies, operating improvements, and marketing synergies. Furthermore, the core of the Eagle Ford is proving to be one of the best opportunities in the world for downspacing, redevelopment, refracs, and also EOR. We have identified roughly 500 economic opportunities across the Validus acreage and this inventory allows us to sustain the high-margin production from our Eagle Ford assets for years to come.
And lastly on slide 18. With our recent resource capture, I wanted to end my comments today by covering the depth and quality of our inventory, which we believe is differentiating compared to the vast majority of the E&Ps out there. Turning your attention to the middle bar on the chart, at our current pace of activity, we've identified 12 years of high return development inventory delivering greater than 30% return with $65 WTI and $3.25 Henry Hub pricing. This inventory disclosure reflects the confidence that we have in delivering repeatable capital efficient results for many years to come. As you would expect, the majority of our risked inventory resides in the target-rich Delaware Basin, but we're also stocked with healthy amounts of high-return inventory across all of our key assets. To be clear, this rigorous characterization is a result of existing well control and detailed subsurface work but is not meant to convey the full extent of our resource base. This bar only represents the high confidence operated inventory that deliver competitive return in a conservative midcycle price scenario.
Moving to the bar on the right, with a higher commodity price and further derisking of our portfolio overtime, we estimate that our inventory extends more than 20 years ay current activity pace. This upside scenario assumes that we capture additional efficiencies, fine tune spacing at higher prices, and further delineate the geologic-rich columns across our acreage footprint. However, I will be quick to add that the upside we've identified is not an exercise including every molecule of potential. We fully expect a significant portion of the upside opportunities to come into development overtime. Tangible examples of these upside opportunities that the team are currently progressing include: massive amounts of resource potential residing in the deeper Wolfcamp intervals; tighter redevelopment spacing and refrac success in the Eagle Ford; ongoing appraisal work in the Powder River Basin to further derisk the Niobrara; and improving capital efficiency that is unlocking resource potential in the Anadarko. Bottom line here is that we have an abundance of highly economic opportunities that will continue to deliver top tier capital efficiency for the foreseeable future.
And with that, I'll turn over the call to Jeff for financial review. Jeff?
