Devon Energy to buy GeoSouthern Energy's Eagle Ford assets for $6 bn
21 November 2013
Devon Energy, one of the largest independent US oil and gas companies, yesterday struck a deal to buy GeoSouthern Energy's Eagle Ford assets for $6 billion in cash.
The purchase price works out to Devon's 2.5 times expected 2015 EBITDA. The deal is immediately accretive to cash flow per debt-adjusted share.
The acquisition, which is expected to close in the first quarter of 2014, will be funded with a combination of cash on hand and borrowings.
The acquired assets include current production of 53,000 barrels of oil equivalent (BOE) per day and 82,000 net acres with at least 1,200 undrilled locations. The risked recoverable resource is estimated at 400 million barrels of oil equivalent, the majority of which consists of proved reserves.
The acquired Eagle Ford acreage is located in DeWitt and Lavaca counties in Texas and is largely contiguous, with most of the position held by production.
The majority of the acquired acreage is located in DeWitt County in Texas and is de-risked, with at least one producing well in each drilling unit.
''With this transaction, we have secured a premier acreage position in the very best part of the world-class Eagle Ford oil play, said John Richels, Devon's president and chief executive officer.
Richels sasid, "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. Furthermore, this transaction is expected to be immediately accretive to virtually every metric, including cash flow per debt-adjusted share.''
Oklahoma-based Devon said that the acquired assets are expected to grow at a compound annual growth rate of 25 per cent over the next several years, reaching a peak production rate of approximately 140,000 BOE per day.
The development drilling program is immediately self-funding and expected to generate annual free cash flow of approximately $800 million beginning in 2015 and growing thereafter.
''We have considered many acquisition opportunities over the past few years, but none have met our stringent criteria,'' said Richels. ''Our patience and disciplined approach have culminated in this outstanding opportunity, allowing us to secure these world-class light oil assets at 2.5 times expected 2015 EBITDA."
GeoSouthern, one of the first companies to successfully execute in the Eagle Ford oil play, will continue to operate all of its other assets in the Texas Gulf Coast region and other areas.
Private equity firm Blackstone Group, GeoSouthern's corporate partner, will exit its stake in the company through this transaction.