Energy Prospectus

The Sweet 16 had a good week, up 3.06%, but it is still down 23.73% YTD.

We are in the first inning of the "Rebound Phase". As I pointed out in today's podcast, we should see significant weekly declines in the U.S. and OECD crude oil inventories through year-end. I expect the number of rigs drilling for oil to remain rather flat through year-end unless WTI pushes up into the mid $50s. U.S. oil production growth has slowed (based on EIA weekly reports). EIA's weekly reports overstated U.S. oil production for April by 182,000 barrels per day, so recent reports of much lower growth in the weekly announcements may be EIA's way of correcting the data. Regardless, predictions that U.S. oil production will top 10 million barrels per day in 2018 are looking more and more like "wishful thinking".

EIA's weekly numbers are all estimates. They have no way of knowing what actual U.S. oil production is.

Wall Street will not focus on how tight the U.S. natural gas market is getting until after Labor Day. A big draw from storage the first week of August could draw some attention to gas.

We are going to publish the next edition of The View From Houston newsletter on Monday, so I will save most of my comments for the newsletter.

The Sweet 16 spreadsheet with my valuations and First Call's price targets for each stock can be downloaded from the EPG website on Saturday.

Devon Energy's Privott 17-H well located in southwest Kingfisher County was brought online and it achieved a peak 24-hour rate of 6,000 oil-equivalent barrels (Boe) per day, which has 50% oil content. The Privott well has achieved the highest ever initial production rate compared to the production data publicly available on any STACK well. The Company expects to recover over 2 million Boe from the Privott 17-H well over its entire lifetime.

Record production due to the use of new proprietary completion design

The Privott 17-H well was drilled with a 10,000-foot lateral and landed in the upper Meramec interval near the Company's Showboat development, which will spud in the third quarter. The new proprietary completion design used by the Company helped in improving the stimulated rock volume around the wellbore which resulted in the record production at this well.

In Q2 2017, Devon also brought four additional high-rate Meramec wells online. These wells are in the core of the over-pressured oil window and the Company used its new proprietary completion design in these wells too. As a result of this new design, these four wells reached the average 30-day initial production rate of 2,000 Boe per day. These results would seem more impressive given that the average well productivity on a per-lateral-foot basis was greater than 300 Boe per day per 1,000 feet of gross perforated interval.

Commenting on the record production, Tony Vaughn, COO of Devon said:

"The outstanding well results we're achieving from our enhanced completion design in the STACK is another example of Devon's technology leadership in the upstream space. This operational excellence is delivering best-in-class well productivity in this world-class play. Looking ahead, we expect to continue to build operational momentum in the STACK as we transition our activity to multi-zone development drilling that will drive additional efficiency gains and maximize the value of our resource."

Other Sweet 16 companies working in the STACK play are: CLR, NFX and XEC

Devon also provided the full-field development update for Q3 2017.

In Q3 2017, Devon plans to spud the Showboat development project, which includes approximately 25 wells across 4 landing zones. The Company is already operating three spacing pilots online in the core of the over-pressured oil window. The pilots which were at 5000-foot laterals have been highly successful in their tests and have delivered average 180-day cumulative production rates of approximately 220,000 Boe per well. The product mix from these wells has 50% oil.

Devon has a premier STACK position in over 600,000 net acres by formation and is mainly concentrated in the economic core of the play. Overall, the Company has exposure to 5,400 risked locations and around 10,000 un-risked locations. The Company's risked locations have more potential for upside than the un-risked locations. The Company's assets across the STACK position in North America provide high returns and has sustainable growth opportunities in the future.

Sharing his views on the matter, Wade Hutchings, Senior Vice President Exploration and Production at Devon, commented:

"Devon will continue to test development concepts including well density, multi-layer well stacking, intra-layer well staggering, and further completion design improvements. This continual flow of data from our extensive position in the STACK will inform and improve our deep inventory of future multi-zone developments and the overall value of our coveted STACK resource."