-
Acquired at 2.5 times expected 2015 EBITDA
-
Immediately accretive to cash flow per debt-adjusted share
-
Delivering a multi-year compound annual oil growth rate of 25 percent
per year
-
Includes current production of 53,000 barrels of oil equivalent per day
-
Risked resource of 400 million oil equivalent barrels
OKLAHOMA CITY & THE WOODLANDS, Texas--(BUSINESS WIRE)--Nov. 20, 2013--
Devon Energy Corporation (NYSE:DVN) announced today it has reached a
definitive agreement to acquire GeoSouthern Energy’s assets in the Eagle
Ford oil play for $6 billion in cash. The acquired assets include
current production of 53,000 barrels of oil equivalent (BOE) per day and
82,000 net acres with at least 1,200 undrilled locations. The risked
recoverable resource is estimated at 400 million barrels of oil
equivalent, the majority of which is proved reserves.
“With this transaction, we have secured a premier acreage position in
the very best part of the world-class Eagle Ford oil play. This
acquisition enhances our already strong North American portfolio by
adding another low-risk, light oil asset that provides outstanding well
economics and self-funded growth,” said
John Richels
, Devon's president
and chief executive officer. “Furthermore, this transaction is expected
to be immediately accretive to virtually every metric, including cash
flow per debt-adjusted share.”
The acquired Eagle Ford acreage is located in DeWitt and Lavaca counties
in Texas and is largely contiguous, with most of the position held by
production. The acreage position is located in the best part of the
play, as evidenced by the highest average initial production rates in
the entire play and average estimated ultimate recoveries in DeWitt
County exceeding 800,000 BOE per well.
“We have considered many acquisition opportunities over the past few
years, but none have met our stringent criteria,” said Richels. “Our
patience and disciplined approach have culminated in this outstanding
opportunity, allowing us to secure these world-class light oil assets at
2.5 times expected 2015 EBITDA. Companies with concentrated asset
positions in the best oil plays in the country, such as the Eagle Ford,
Bakken, and Permian Basin, are trading at substantially higher
multiples.”
The majority of the acquired acreage is located in DeWitt County and is
derisked, with at least one producing well in each drilling unit. By
entering the play in full development mode, Devon expects to
substantially grow production in the near term while also generating
significant free cash flow. The acquired assets are expected to grow at
a compound annual growth rate of 25 percent over the next several years,
reaching a peak production rate of approximately 140,000 BOE per day.
The development drilling program is immediately self-funding and
expected to generate annual free cash flow of approximately $800 million
beginning in 2015 and growing thereafter.
“The addition of these assets leverages our core competencies,” said
Dave Hager
, Devon’s chief operating officer. “The technical expertise
and project management experience developed in our other large scale,
unconventional development plays provide us the skillset to efficiently
develop these assets and optimize the value through improved recoveries
and reduced costs. GeoSouthern was a true pioneer in this world-renowned
field, and we are pleased to welcome their team to Devon and look
forward to building upon their outstanding results in the play.”
The acquisition will be funded with a combination of cash on hand and
borrowings. Devon expects to repay the borrowings with free cash flow
and proceeds from the monetization of non-core assets. The transaction
is subject to customary purchase price adjustments, terms and
conditions, and is expected to close in the first quarter of 2014.
GeoSouthern, one of the first companies to successfully execute in the
Eagle Ford oil play, will continue to operate all of its other assets in
the Texas Gulf Coast region and other areas. The Blackstone Group (NYSE:
BX), GeoSouthern’s corporate partner, will exit its stake in the company
through this transaction.
Advisors
The legal advisor to Devon for this transaction is Skadden, Arps, Slate,
Meagher & Flom LLP. Morgan Stanley and Goldman, Sachs & Co. served as
financial advisors to Devon. The legal advisor to GeoSouthern is Simpson
Thacher & Bartlett LLP. Jefferies & Company, Inc. served as financial
advisor to GeoSouthern.
Conference Call and Webcast Today
Devon will discuss this transaction today on a conference call and
webcast at 9am Central Time (10 a.m. Eastern Time). The webcast may be
accessed from Devon’s home page at www.devonenergy.com.
This press release includes "forward-looking statements" as defined
by the Securities and Exchange Commission (SEC). Such statements are
those concerning strategic plans, expectations and objectives for future
operations. All statements, other than statements of historical facts,
included in this press release that address activities, events or
developments that the company expects, believes or anticipates will or
may occur in the future are forward-looking statements. Such statements
are subject to a number of assumptions, risks and uncertainties, many of
which are beyond the control of the company. Statements regarding future
drilling and production are subject to all of the risks and
uncertainties normally incident to the exploration for and development
and production of oil and gas. These risks include, but are not limited
to, the volatility of oil, natural gas and NGL prices; uncertainties
inherent in estimating oil, natural gas and NGL reserves; the extent to
which we are successful in acquiring and discovering additional
reserves; unforeseen changes in the rate of production from our oil and
gas properties; uncertainties in future exploration and drilling
results; uncertainties inherent in estimating the cost of drilling and
completing wells; drilling risks; competition for leases, materials,
people and capital; midstream capacity constraints and potential
interruptions in production; risk related to our hedging activities;
environmental risks; political or regulatory changes; and our limited
control over third parties who operate our oil and gas properties.
Investors are cautioned that any such statements are not guarantees of
future performance and that actual results or developments may differ
materially from those projected in the forward-looking statements. The
forward-looking statements in this press release are made as of the date
of this press release, even if subsequently made available by Devon on
its website or otherwise. Devon does not undertake any obligation to
update the forward-looking statements as a result of new information,
future events or otherwise.
The SEC permits oil and gas companies, in their filings with the SEC,
to disclose only proved, probable and possible reserves that meet the
SEC's definitions for such terms, and price and cost sensitivities for
such reserves, and prohibits disclosure of resources that do not
constitute such reserves. This release may contain certain terms, such
as resource potential and exploration target size. These estimates are
by their nature more speculative than estimates of proved, probable and
possible reserves and accordingly are subject to substantially greater
risk of being actually realized. The SEC guidelines strictly
prohibit us from including these estimates in filings with the SEC. U.S.
investors are urged to consider closely the disclosure in our Form 10-K,
available at www.devonenergy.com.
You can also obtain this form from the SEC by calling 1-800-SEC-0330 or
from the SEC’s website at www.sec.gov.
Devon Energy Corporation is an Oklahoma City-based independent energy
company engaged in oil and gas exploration and production. Devon is a
leading U.S.-based independent oil and gas producer and is included in
the S&P 500 Index. For more information about Devon, please visit our
website at www.devonenergy.com.
GeoSouthern is a privately held, independent exploration and
production company based in The Woodlands, Texas, established in 1981.
The Company focuses its efforts in the Texas Gulf Coast area and owns
and operates substantial acreage positions in the Eagle Ford Shale and
Austin Chalk
trends. In addition, GeoSouthern’s midstream affiliate,
Eagle Ford Field Services, owns a crude oil terminal and pipeline
servicing the company’s Eagle Ford assets.
Blackstone is one of the largest alternative asset managers in the
world, with $248 billion in assets under management. Blackstone's energy
investments are funded jointly by Blackstone Energy Partners and
Blackstone Capital Partners VI, which together represent over $5 billion
of private equity capital allocated to the sector. Blackstone's leading
energy franchise has an extensive track record of investing in
partnership with talented management teams seeking to capitalize on
growth opportunities and realize the full potential of their assets. Led
by
David Foley
, the Chief Executive Officer of Blackstone Energy
Partners, Blackstone has committed and invested more than $7.5 billion
of private equity throughout the energy value-chain on a global basis.
Source: Devon Energy Corporation
Devon Energy Corporation
Investors:
Scott Coody, 405-552-4735
or
Shea
Snyder, 405-552-4782
or
Media:
Chip Minty, 405-228-8647
or
GeoSouthern
Media:
Tom
Johnson, 212-371-5999
or
Glen Orr, 713-205-7770