Devon Invests in Geothermal Start-Up Fervo

Devon Energy said Tuesday it would invest $10 million in enhanced geothermal start-up Fervo Energy, a move one executive at the Oklahoma City-based E&P described as a “good match” for its new energy ventures strategy.

“We've always had the view … that the kinds of opportunities that are going to be the most likely to strategically fit with us are going to be things that have some adjacency or connection to our core business,” Devon Chief Corporate Development Officer David Harris told Energy Intelligence. “They're either on or near our existing asset base, or they're opportunities that leverage the skillsets and disciplines and the kinds of things that we do in the exploration and production business every day. And Fervo, enhanced geothermal, absolutely fits in that sort of second category.”

That’s because unlike traditional geothermal energy, Houston-based Fervo uses horizontal drilling and multi-stage well completions to capture heat from reservoirs — the same methods E&Ps such as Devon use to extract hydrocarbons from tight formations.

The deal marks Devon’s first direct investment in a geothermal or renewable firm, although it has recently been involved in some collective investments. Last year, Devon, OneOK and Williams partnered with Energy Investment Capital to provide funding to early-stage technology companies.

Exchange of Expertise

Beyond the $10 million investment, Harris also sees mutual knowledge-sharing taking place between the Devon and Fervo.

“There's tremendous similarity to not just what we're doing today in our business, but kind of the lifecycle of how the upstream business in the US has evolved,” Harris said.

For example, experience in the switch from vertical to horizontal wells and finding the right spacing between wells is something Devon will be able to contribute as Fervo’s projects move forward.

Fervo will have other sources to draw from as well. The start-up has racked up a number of investors active in the shale patch, including oil-field services players Liberty and Helmrich & Payne.

While Harris said the Fervo investment envisaged a “standalone power development,” Devon is also investigating whether its existing assets could be used for geothermal development or if geothermal could be used to power its own operations.

“Those are all questions we don't know the answer to, but are the kinds of potential outcomes that caused us to be interested in learning more about this space,” he said.

Fervo’s scheme also includes co-locating a direct air capture facility with a geothermal plant, and the company’s website mentions lithium extraction, something E&Ps are increasingly looking into. Harris confirmed that Devon was interested in lithium extraction as well, but the company's activity has so far been mostly concentrated on produced water.

“In the Fervo context, I probably think about it as being more upside to the investment rather than the base case part of the investment thesis,” he said.

Down the Line

Harris also mentioned that Devon was examining other investments including carbon capture and sequestration and produced water recycling. However, he does not expect Devon to make announcements anytime soon.

“When we say we're going to be disciplined in particular, I think people are sometimes surprised to find out that the natural gestation period on these kinds of investment ideas is a little bit longer than they might think,” he said.