Maureen Lorenzetti
OGJ Online
NEW YORK CITY, Sept. 4 -- Devon Energy Corp. officials plan to take an across the board look at their newly expanded company to reduce debt incurred from the recent purchases of Anderson Exploration Ltd. and Mitchell Energy & Development Co. (OGJ Online, Sept. 4, 2001).
"There will be a rigorous review of assets," Devon Chairman Larry Nichols told the Lehman Brothers CEO Energy Conference Tuesday. Nichols said his management team "has a pretty good idea what those assets are," but he declined to reveal what properties the company was planning to offer.
Devon plans to pay for Anderson through cash flow from operations and about $1 billion in what it calls "non-core" property sales.
But companies should not expect to look for any quick bargains any time soon, Nichols suggested. There will be no fire sales.
The company was "staggered [to discover] how cheap the debt was" to finance the Anderson deal. Under the terms of the transaction, Devon "has plenty of time -- 3 years -- before we even have to think about selling assets," Nichols told the group of institutional investors.
To help finance its latest acquisition, Devon plans to access the 144A bond market and issue long-term debt that matures between 10- 30 years. Proceeds from the debt offering would be used to prepay the first 2 to 3 years of amortization; the company plans to maintain its investment grade rating as well and has planned meetings with Moody's and Standard & Poor's.
Analysts have speculated that a possible asset sale by Devon might include a portion of the company's limited international portfolio. Of the 2,044 MMboe in proven reserves held by Devon, 87% are in North America.
The company has interests in West Africa, the South China Sea, and Azerbaijan, along with gas sales in Indonesia.
Nichols declined to detail if any international assets may be on the table. He said that the company's international plays were providing "meaningful" growth but suggested that Devon is not inclined to go exploring all over the globe.
"We plan to be narrowly focused" and not go "head to head" with the majors, Nichols said.
Contact Maureen Lorenzetti at [email protected]
