The agreement, expected to close in the third quarter, covers 900,000 net acres in the Rockies, Midcontinent, East Texas, North Louisiana, and South Texas regions with 4,500 total wells. Linn says it has identified more than 1,000 future drilling sites and more than 600 recompletion opportunities.
Production from the assets by Devon totals 275 MMcfd of gas equivalent, of which 80% is gas. As of Dec. 31, 2013, proved reserves associated with the properties totaled 1.242 tcfe of gas.
Linn plans to sell its position in the Granite Wash and Cleveland plays in the Texas Panhandle and western Oklahoma, through which it intends to finance the acquisition from Devon.
Linn is operating four drilling rigs in the area and producing 230 MMcfed of liquids-rich gas. The company has tested and developed 17 horizontal intervals, including shallow oil, liquids-rich Granite Wash, and deep Atoka gas.
Because of this delineation, Linn has catalogued significant drilling inventory over its 147,000 net acre position. Linn began horizontally drilling the Granite Wash in 2010 and has increased production in the area from 65 MMcfed to its current rate.
The company in 2011 doubled its inventory of Granite Wash horizontal drilling sites in Texas and Oklahoma to more than 400 through a $600 million purchase of assets (OGJ Online, Nov. 8, 2011).
John Richels, Devon president and chief executive officer, commented, “With the sale of our remaining noncore assets, the portfolio transformation that we announced late last year is now complete.”
Devon has made significant changes to its portfolio over the past year, acquiring 82,000 net acres in the Eagle Ford for $6 billion (OGJ Online, Feb. 28, 2014); merging its midstream assets with CrossTex to create EnLink Midstream LLC and master limited partnership EnLink Midstream Partners LP (OGJ Online, Mar. 7, 2014); and selling its Canadian conventional assets for $3.125 billion (OGJ Online, Apr. 2, 2014).
“The sale of Canadian and US noncore properties over the past few months has generated in excess of $5 billion of proceeds at an accretive multiple of nearly 7 times 2013 EBITDA,” said Richels. The transaction reduces Devon’s debt by more than $4 billion this year.
Richels added that liquids are expected to represent 60% of the company’s production by yearend, while multiyear oil production growth is projected to be more than 20%.