Devon Energy Announces $7.0 Billion of Property Sales and Oil Sands Joint Venture

abarrelfullabarrelfull wrote on 20 Jul 2015 12:13

March 11, 2010

Devon Energy Corporation (NYSE: DVN) today announced that it has entered into agreements to sell all of its assets in the deepwater Gulf of Mexico, Brazil and Azerbaijan to BP for $7.0 billion. In addition, BP will assume Devon's leases of the Seadrill West Sirius and Transocean Deepwater Discovery drilling rigs for the duration of the contract terms. The company also announced that Devon and BP will form a heavy oil joint venture to develop BP's Kirby oil sands leases in Alberta, Canada.

"These sales, combined with our previously announced divestitures of $1.3 billion of deepwater Gulf of Mexico assets, put Devon well on the way to completing its strategic repositioning," said Larry Nichols, Devon's chairman and chief executive officer. "Given any reasonable sales price for Devon's remaining divestiture assets, the transactions to date suggest that our total after-tax proceeds for the entire divestiture program will exceed our previously announced range of $4.5 to $7.5 billion."

Devon expects closings on the various assets to occur at different times before year-end. The transactions are subject to customary closing conditions and regulatory approvals. Sales proceeds for the assets will be adjusted for revenues, expenses and capital expenditures from January 1, 2010, through the dates of closing. Devon plans to provide updates to guidance for 2010 production, expenses and capital expenditures as the transactions are closed.

Devon and BP Oil Sands Joint Venture

In order to facilitate the oil sands joint venture, Devon will acquire 50 percent of BP's interest in the Kirby oil sands leases. Devon will pay BP $500 million at closing and commit to fund an additional $150 million of capital costs on BP's behalf. Devon will be the operator of the Kirby project which lies in close proximity to Devon's highly successful Jackfish steam-assisted gravity drainage (SAGD) project. Like Jackfish, Kirby is expected to be a multi-stage SAGD development. Devon and BP also agreed to negotiate a long-term heavy crude sales agreement for Devon's share of Kirby production.

"We are excited about the opportunity to work with a world-class organization such as BP to leverage our SAGD expertise from Devon's industry-leading Jackfish project," said John Richels, Devon's president. "While the Kirby development will require additional evaluation to confirm its size and scope, we believe that it will support several phases of development and has total recoverable resources that are greater than our Jackfish complex. We believe Kirby to be similar to Jackfish in terms of geology, reservoir characteristics and oil quality."

Completion of Repositioning

On November 16, 2009, Devon announced plans to divest its Gulf of Mexico and international assets to allow the company to focus on its world-class North American onshore assets. The divestiture proceeds will be allocated between the acceleration of development of Devon's North American onshore properties and debt reduction. Upon completion of the repositioning, Devon will emerge with even more liquidity and with one of the strongest balance sheets in the peer group.

The company has now announced the sale of the majority of the divestiture assets, and data rooms for the remaining divestiture properties in the Gulf of Mexico shelf, offshore China, and other minor international assets are currently open. Devon expects the closings of all divestitures to be completed prior to year-end.

Impact on Devon's Proved Reserves and Production

As of December 31, 2009, Devon's reported estimated proved reserves included 20 million barrels of liquids and 198 Bcf of natural gas associated with the Gulf of Mexico assets being purchased by BP. Approximately 37 percent of these reserves were classified as proved developed. The international assets BP is purchasing were reported as discontinued operations at December 31, 2009 and, as such, were excluded from Devon's reported reserves and 2010 guidance for production from continuing operations.

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