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Agrees to acquire premier oil-focused leasehold in STACK and Powder
River Basin plays
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Creates industry-leading positions in best emerging oil development
plays in North America
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Adds thousands of high-quality drilling locations with substantial
resource upside
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Commences divestiture program with targeted proceeds of $2 to $3
billion
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Proceeds from asset sales to bolster financial position
OKLAHOMA CITY--(BUSINESS WIRE)--
Devon Energy Corp. (NYSE:DVN) today announced it has agreed to acquire
80,000 net surface acres, with up to 10 prospective zones, in the
Anadarko Basin STACK play from privately held Felix Energy, a portfolio
company of EnCap Investments, for $1.9 billion. In a separate
transaction, the Company has also agreed to acquire 253,000 net acres in
the Powder River Basin for $600 million. The transactions will be funded
with approximately $1.35 billion of Devon equity issued to sellers and
approximately $1.15 billion of cash on hand and borrowings.
“Devon has made several bold moves over the past few years transforming
the company into a leading North American onshore producer with a
portfolio that provides an advantaged platform to generate long-term
value growth for shareholders,” said Dave Hager, president and CEO.
“These acquisitions materially core up our position in two of the best
emerging North America development oil plays and further upgrade our
asset portfolio.”
“The success we have had growing our asset base has generated an
abundance of opportunities within our portfolio,” said Hager. “In an
effort to focus exclusively on our very best resource plays, strengthen
our already solid financial position and drive investor value, we are
also announcing our intent to divest non-core assets. This will sharpen
our focus on what we believe to be the best oil and gas assets in North
America.”
The EnLink Advantage Secures STACK Acquisition
In a related transaction announced separately today, EnLink Midstream
agreed to acquire Tall Oak Midstream, a portfolio company for EnCap
Flatrock Midstream, for $1.55 billion. Tall Oak’s gathering and
processing assets are strategically located in the core area of the
STACK play and the vast majority of the Felix acreage position is
dedicated to this midstream infrastructure.
“We are excited about the opportunity presented with the Felix and Tall
Oak acquisitions,” said Hager. “The synergistic relationship of these
assets and our ownership in EnLink allowed the simultaneous acquisition
of Felix’s upstream business by Devon with EnLink acquiring the
associated midstream infrastructure of Tall Oak. This collaboration was
a competitive advantage in securing these top-tier assets and a
testament to the strength of our partnership which is well positioned to
benefit from the significant upside the resource-rich STACK play offers.”
Best-In-Class Position in STACK Play
The 80,000 net surface acres being acquired in the STACK play are
located in Blaine, Canadian and Kingfisher counties in Oklahoma,
immediately northeast of Devon’s legacy STACK position. Situated in the
over-pressured oil window of the play, these properties include low-risk
development targets in up to 10 intervals including multiple landing
zones in the Meramec, Osage and Woodford formations. Given the potential
for numerous landing zones and tighter infill spacing opportunities
across this high-quality acreage, Devon has identified 1,400 risked
locations, with an unrisked inventory of more than 3,000 locations.
The acquired properties include production of approximately 9,000
oil-equivalent barrels (Boe) per day and estimated risked resource of
approximately 400 million Boe. Based on an estimated value of the
existing daily production in excess of $300 million, the Company
estimates it is paying approximately $20,000 per surface acre or
approximately $4 per Boe of risked resource.
“This acquisition has captured a significant position in the most
economic portion of the STACK oil window, which is emerging as one of
the top resource plays in North America,” said Tony Vaughn, executive
vice president of exploration and production. “Combined with our current
acreage position we have created a best-in-class STACK position that
provides significant resource and drilling inventory to support visible
growth for many years to come.”
Upon closing of the Felix assets in early 2016, Devon’s daily production
in the STACK play, which includes the Cana-Woodford development, will
increase to an industry-leading total of nearly 80,000 Boe per day. The
Company now has exposure to 430,000 net surface acres in the STACK with
5,300 risked locations.
Achieving Scale in the Powder River Basin
The acquired Powder River Basin acreage is located to the south of
Devon’s legacy position in Wyoming and includes production of 7,000 Boe
per day, with approximately 85 percent oil. This leasehold resides in
the core of the Powder River oil fairway and is most prospective for the
Parkman, Turner and Teapot formations. The contiguous acreage allows for
extended-reach horizontal drilling and the Company has conservatively
identified 500 development-ready locations with potential for as many as
2,700 unrisked locations as appraisal drilling further derisks multiple
formations in the oil fairway.
“This opportunistic transaction adds scale and scope to our Powder River
Basin operations, creating the largest and highest quality acreage
position in the industry,” said Vaughn. “Our Powder River programs are
delivering some of the best returns at Devon, and we will apply our
unique basin knowledge to efficiently develop and derisk this premium
acreage position.”
After deducting the value of current production at $30,000 per flowing
barrel and $100 million of midstream infrastructure, Devon secured the
undeveloped leasehold at roughly $1,100 per acre.
Upon closing the transaction, Devon’s daily production from its Rockies
business unit will increase to more than 30,000 Boe per day, and its
Powder River Basin leasehold position will more than double to 470,000
net acres with stacked-pay potential across multiple oil-prone
formations. The size of the opportunity is significant with several
billion barrels of unrisked resource across the basin.
Funding Details and Non-Core Asset Sale Expectations
The acquisitions will initially be funded with a combination of equity
and cash. Devon will issue shares to sellers valued at approximately
$1.35 billion and intends to fund the balance of the acquisitions
through cash on hand and borrowings.
The Company is in the process of marketing its Access Pipeline in Canada
and is also planning to monetize various non-core upstream assets across
its portfolio. Devon has identified 50,000 to 80,000 Boe per day of
production from non-core assets to divest throughout 2016. The Company
expects midstream and upstream divestitures to generate proceeds of $2
to $3 billion and plans to utilize sales proceeds to strengthen its
financial position.
Conference Call and Webcast Information
Devon will discuss these transactions on a conference call and webcast
at 8 a.m. Eastern Time on Monday, December 7, 2015. The webcast may be
accessed from Devon’s home page at www.devonenergy.com.
Advisor
The financial advisor to Devon for the Felix transaction was Morgan
Stanley & Co. LLC. The financial advisor to Felix was Tudor, Pickering,
Holt & Co.
Forward-Looking Statements
This press release includes "forward-looking statements" as defined
by the Securities and Exchange Commission (SEC). Such statements include
those concerning strategic plans, expectations and objectives for future
operations, and are often identified by use of the words “expects,”
“believes,” “will,” “would,” “could,” “forecasts,” “projections,”
“estimates,” “plans,” “expectations,” “targets,” “opportunities,”
“potential,” “anticipates,” “outlook” and other similar terminology. 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 failure to
consummate the transaction with the sellers due to unsatisfied closing
conditions or otherwise; the risk that the assets to be acquired will
not be integrated successfully or that such integration will take longer
than anticipated; the volatility of oil, natural gas and NGL prices;
uncertainties inherent in estimating oil, natural gas and NGL reserves,
including with respect to the assets to be acquired; 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 changes; changes in laws or regulations; our limited
control over third parties who operate our oil and gas properties; our
ability to successfully complete mergers, acquisitions and divestitures;
and other risks identified in our Form 10-K and our other filings with
the SEC. 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, risked resource, potential locations, risked or
unrisked locations, exploration target size and other similar
terms. 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. 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.
About Devon Energy
Devon Energy is a leading independent energy company engaged in finding
and producing oil and natural gas. Based in Oklahoma City and included
in the S&P 500, Devon operates in several of the most prolific oil and
natural gas plays in the U.S. and Canada with an emphasis on a balanced
portfolio. The Company is the second-largest oil producer among North
American onshore independents. For more information, please visit www.devonenergy.com.
View source version on businesswire.com: http://www.businesswire.com/news/home/20151207005488/en/
Source: Devon Energy Corp.