Devon Energy Corp. (NYSE: DVN) today announced it has entered into a definitive agreement to sell its assets in the Barnett Shale to Banpu Kalnin Ventures (BKV) for $770 million. This transaction is subject to customary terms and conditions and is expected to close in the second quarter of 2020. Devon expects no incremental cash taxes associated with the divestiture of these assets.
“Devon’s transformation to a U.S. oil growth business is now complete,” said Dave Hager, president and CEO. “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. Furthermore, these transactions accelerate efforts to focus exclusively on our resource-rich U.S. oil portfolio, where we have the ability to substantially increase returns, margins and profitability.
“The Barnett Shale has been a cornerstone asset for Devon over the past two decades,” said Hager. “With this change in ownership, it is great to see our talented and innovative employees supporting this high-quality gas asset transition to a world-class company like Banpu.”
Board Authorizes New $1 Billion Share-Repurchase Program
Devon also announced today that its board of directors has authorized 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, or nearly 30 percent of outstanding shares, at a total cost of $4.8 billion.
“Today’s announcement to expand our industry-leading share repurchase program is consistent with our disciplined capital allocation strategy and demonstrates our firm commitment to return capital to shareholders,” said Jeff Ritenour, executive vice president and chief financial officer. “Given our strong balance sheet and projected free cash flow, this new authorization will provide us additional flexibility to continue the return of cash to our shareholders.”
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Barnett Shale Divestiture Transaction Details
Net production from the Barnett Shale properties averaged 597 million cubic feet equivalent per day in the third quarter of 2019. At year-end 2018, proved reserves associated with these properties amounted to approximately 4 trillion cubic feet equivalent. The transaction includes various purchase price adjustments that, among other things, allocate revenues and expenses based on a Sept. 1, 2019 effective date.
“This deal represents our continued belief in the long-term potential of U.S. shale gas and is fully in line with Banpu’s vision of developing a greener and smarter energy portfolio,” said Christopher Kalnin, CEO of BKV.
The Barnett transaction represents BKV’s seventh transaction since 2016, with over $1.3 billion of capital deployed into gas-weighted assets. This acquisition will make BKV a significant producer of natural gas in the U.S. with over 780 million cubic feet per day of production from assets in Pennsylvania’s Northeast Marcellus and now in the Barnett Shale.
Jefferies and Citi acted as financial advisors to Devon on the Barnett Shale transaction. Vinson & Elkins LLP acted as legal advisor to Devon. Willkie Farr & Gallagher LLP acted as legal advisor to BKV.
