Devon Energy Inks $6 Billion Agreement to Acquire Eagle Ford Assets
Using a combination of cash on hand and credit, Devon Energy announced today it intends to expand on its already significant holdings in Texas after signing a $6 billion all-cash agreement to acquire the Eagle Ford assets of GeoSouthern Energy. As of June 30, 2013, Devon had $4.23 billion in cash and equivalents on its balance sheet.
The Eagle Ford play, according to industry specialists, is the largest oil and gas development in the world as measured by capital invested.
According to Devon, the assets included in the acquisition are located "in the best part of the play." Devon points to the area as having "the highest average initial production rates in the entire play and average estimated ultimate recoveries in DeWitt County exceeding 800,000 BOE per well." The assets are already producing 53,000 BOE per day and include 82,000 net acres with at least 1,200 locations that have yet to be drilled, according to the company.
Devon said the Eagle Ford assets will generate immediate free cash flow and be "immediately accretive to virtually every metric," as the play is already in production mode. Devon intends to rapidly expand operations to achieve a target of 25% annual compound growth rate for the next several years. Upon completion of its rapid-growth phase, Devon is targeting daily production rates in the new assets of 140,000 BOE and an estimated $800 million in free cash flow by 2015.
Commenting on the acquisition, Devon President and CEO John Richels said, "This acquisition enhances our already strong North American portfolio by adding another low-risk, light oil asset that provides outstanding well economics and self-funded growth."
The deal is expected to close in Q1 of 2014, subject to customary closing conditions.
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