Nearly every major oil and gas company in the U.S. is keenly aware of the challenges thrown on its by the Biden administration’s anti-oil and gas regulations.
Take Devon Energy for instance. In a recent filing of an annual Form 10-K report to security holders with the Securities and Exchange Commission, the Oklahoma City company made it fully aware to investors that changes in public policy “have affected, and in the future could further affect” its operations.
Devon noted how President Biden and certain members of his addministration have taken steps to transition the economy away from fossil fuels and to promote stricter environmental regulations and “such proposals could impose new and more onerous burdens on our industry and business.”
Devon knows that the regulatory and public policy developments drawn up in the Biden administration could restrict production levels, delay necessary permitting and impose price controls, raise taxes, make changes of royalties payable to governments and in the end, “increase our operating costs.”
Then there is the matter of federal lands where the White House wants additional regulation of oil and gas leasing and permitting on federal lands. It is making changes n bonding requirements, royalty rates, rental rates and minimum bids.
” While it is not possible at this time to predict the ultimate impact of these actions or any other future regulatory changes, any additional restrictions or burdens on our ability to operate on federal lands could adversely impact our business in the Delaware and Powder River Basins, as well as other areas where we operate under federal leases.”
Devon’s report revealed the caution that its leadership is displaying on other areas of oil and gas operations, including hydraulic fracturing where the EPA has issued more regulations including the capture of air emissions released during the process. Again, the company warned that such new restrictions could mean increased compliance costs or delays or even a cessation of development.
Seismic activity in Oklahoma, western Texas and southeastern New Mexico also has the attention of Devon’s executive officers. New protocols were adopted in 2021 by New Mexico to cover injection rates aat salt-waater disposal wells.
Earlier this year, the Railroad Commission of Texas responded to increased numbers of earthquakes believed to be connected to disposal well activities in the Delaware and Midland Basins of the Permian. The suspension of all disposal well permits that injected into deep strata within the Northern Culberson-Reeves area affected Devon’s operating areas.
The company said it might mean an increase in operating expenses or even “require us to curtail our development plans or otherwise adversely impact our operations.”
Despite the cautionary note to security holders, Devon still expects only a slight change in its 2024 capital program. About 60% is focused on its highest returning oil play, the Delaware Basin. The rest will be deployed to other core areas of Eagle Ford, Williston Basin, Anadarko Basin and Powder River Basin but with a reduced activity level in some of these areas, particularly the Williston Basin.
Devon expects its 2024 capital to be about 10% lower than 2023 due to activity reduction and other cost reductions.
“Our capital efficiency is expected to improve as lower 2024 capital offsets the impact of lower oil production from reduced
2024 activity. Due to our strategy of spending within cash flow, we expect to continue generating material amounts of free cash flow for 2024.”