Devon Energy Corp., Oklahoma City, signed a definitive agreement to sell its Barnett shale assets to Banpu Kalnin Ventures (BKV) for $770 million, completing the plan announced early in the year to shed Canadian operations and natural gas production to focus on US oil (OGJ Online, Feb. 20, 2019).
The transaction includes over 320,000 gross acres and 4,200 producing wells, making BKV a significant producer of natural gas in the US with over 780 MMcfd of production from assets in Pennsylvania’s Northeast Marcellus and now in the Barnett shale. Net production from the properties averaged 597 million cu ft equivalent/day in this year’s third quarter. At year-end 2018, proved reserves associated with the properties amounted to 4 trillion cu ft equivalent.
“Devon’s transformation to a US oil growth business is now complete,” said Dave Hager, president and chief executive officer. “The timely and tax-efficient exit from Canada and the Barnett this year has generated $3.6 billion of proceeds at accretive multiples to Devon’s current valuation.”
In May, Canadian Natural Resources Ltd. and Devon announced a deal that saw CNRL increase its crude oil production capacity by 128,300 b/d before royalties with the purchase of Devon Canada for $3.775 billion (Can.) cash (OGJ Online, May 29, 2019).
Devon will now focus on its positions in four basins: the Delaware, STACK, Powder River, and Eagle Ford. Earlier in December, Devon signed with Dow to jointly develop a portion of Devon’s STACK acreage in central Oklahoma starting with the development of two drilling units in northern Canadian County where drilling operations are expected to begin mid-year 2020 (OGJ Online, Dec. 10, 2019). Devon's operations in the STACK are currently focused in the oil-prone Meramec and the liquids-rich Cana-Woodford shale.
With the report of the sale, Devon announced a new $1 billion share-repurchase program, bringing the total repurchase authorization to $6 billion. The new program expires on Dec. 31, 2020, and $800 million of the $1 billion authorization is conditioned upon the closing of the Barnett transaction. To date, Devon has repurchased 144 million shares, nearly 30% of outstanding shares, at a total cost of $4.8 billion.
The transaction is BKV’s seventh since 2016, with over $1.3 billion of capital deployed into gas-weighted assets. It is financially backed by its sole investor, Banpu Pcl, a Thailand-based coal mining and power-generation company.
Subject to customary terms and conditions, the deal is expected to close in second-quarter 2020.