Sinopec paying $2.2bn for Devon US shale acreage
By TESS STYNES
Devon Energy Corp. reached a deal with Sinopec International Petroleum Exploration & Production Corp. in which the Chinese oil major will pay $2.2 billion for a one-third interest in five alternative shale plays.
The oil and gas explorer's shares were up 4.3% at $64.67 in early trading.
The deal is another sign of foreign companies' growing appetite for US oil-and-gas assets. It comes on the heels of French oil giant Total SA's purchase of a minority stake in a swath of Chesapeake Energy Corp.'s Ohio shale discovery for $2.32 billion.
"This arrangement improves Devon's capital efficiency by recovering our land and drilling costs to date and by significantly reducing our future capital commitments," said Devon CEO John Richels.
Under the deal, expected to close in the current quarter, Devon will serve as the operator. Sinopec will pay Devon $900 million at closing and $1.6 billion paid in the form of a drilling carry, which is expected to be realized by the end of 2014.
The deal includes positions across five shale regions: the Tuscaloosa Marine Shale, the Niobrara, the Mississippian, Ohio Utica Shale and the Michigan Basin.
The drilling carry is expected to fund 70% of Devon's capital requirements, which will result in Sinopec paying 80% of the overall development cost.
The companies expect to drill 125 gross wells by the year's end across the five areas.
Devon in November reported third-quarter earnings fell 50% from a year-earlier period that included a $1.5 billion divestiture gain, as its hedging losses continued to mask its revenue growth.
Dow Jones Newswires
Comments