Devon to divest international, Gulf of Mexico assets

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, Nov. 16 -- Devon Energy Corp., Oklahoma City, plans to divest its Gulf of Mexico and international assets in a move toward focusing on high-growth US and Canadian onshore assets, the company reported Nov. 16.

The strategy, according to Devon Chairman and Chief Executive Officer J. Larry Nichols, will enable the company “to emerge with an even stronger balance sheet and one of the lowest overall cost structures” among its peers.

Devon expects to open data rooms and start the divestiture process in first-quarter 2010. It expects to complete the process by yearend 2010.

The divestitures are expected to generate aftertax proceeds of $4.5-7.5 billion. The company expects the repositioning to be highly accretive to earnings, cash flow, production, and reserves beginning in 2011.

Devon has 3,500 wells in the Barnett shale gas play, and it also has acreage in the Haynesville shale. Internationally, the company has assets in Azerbaijan, Brazil, China, and Russia.

Changing reserves base
Based on estimated yearend 2009 proved reserves, Devon's Gulf of Mexico and international properties comprise 7% of Devon’s proved reserves of 2.8 billion boe.

If the anticipated sale had occurred in 2009, Devon's estimated yearend 2009 proved reserves would have been 2.6 billion boe.

Oil and natural gas liquids account for 43% of companywide estimated proved reserves at yearend 2009. Pro forma for the divestiture of the Gulf of Mexico and international assets, oil and NGL will account for 41% of the total.

Regarding international assets, Devon primarily is involved off Brazil and off China.

Devon currently is developing the Polvo project in the Campos basin in 300 ft of water on Brazil’s Block BM-C-8. Production started in 2007. Devon holds interest in 10 blocks off Brazil covering 1.4 million acres.

The company has joined exploration efforts with Petroleo Brasileiro SA (Petrobras) on five of these blocks.

Off China, Devon’s oil production is from the Panyu development in the Pearl River Mouth basin in the South China Sea on Block 15/34.

In addition to Panyu, Devon holds 100% interest in four exploration blocks off China. In aggregate, Devon’s Chinese acreage covers 7.9 million net acres.

Contact Paula Dittrick at paulad@ogjonline.com.

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