Devon Energy Corporation (DVN) just made a power move that’s got the oil industry buzzing. They’ve sealed a $5 billion deal to acquire Grayson Mill Energy’s Williston basin business, marking a significant expansion into some of the most profitable oil production territories. Scheduled to close by the end of the third quarter, this deal is a game-changer for both Devon Energy and its investors.
The acquisition involves $3.25 billion in cash and $1.75 billion in stock, bringing substantial assets to Devon’s portfolio. This includes 307,000 net acres in the highly lucrative Williston Basin, with 500 gross locations and 300 high-quality refrac candidates. Projected production is set to hit 100,000 oil-equivalent barrels per day (55% of which is oil) by 2025. Financially, it promises immediate accretion to earnings, free cash flow, and net asset value, forecasting a free cash flow yield of 15% at an $80 WTI oil price.
This move comes after a year of failed attempts to make similar acquisitions, mainly due to undervalued shares. But Devon Energy has shown its resilience, adapting to market conditions to bring about a win that’s not just tactical but transformative.
Analysts are applauding Devon’s latest acquisition.
“The acquisition of Grayson Mill is an excellent strategic fit for Devon that allows us to efficiently expand our oil production and operating capabilities.”
An official from Devon Energy
This transaction is seen as a masterclass in strategic expansion, elevating Devon’s standing as a formidable player in the oil and gas sector.
Besides bolstering Devon Energy’s operational footprint, the acquisition is set to bring in substantial financial benefits. Up to $50 million in annual cash flow savings are expected from operational efficiencies and marketing synergies. This acquisition isn’t just a feather in Devon’s cap; it’s a solid boost to its bottom line, with these cash savings translating directly into stronger earnings and enhanced free cash flow.
Here’s a snapshot of the deal:
| Aspect | Value/Detail |
|---|---|
| Acquisition Value | $5 billion, comprising $3.25 billion in cash and $1.75 billion in stock |
| Effective Date | June 1, 2024 |
| Expected Closing | Third quarter of 2024 |
| Production | Oil production: 100,000 oil-equivalent barrels per day (55% oil) by 2025, Total ordinary shares: 1.75 billion |
| Assets/Acreage | Adds 307,000 net acres (70% working interest) in the Williston Basin, Adds 500 gross locations and 300 high-quality refrac candidates |
| Cash Savings | Up to $50 million in average annual cash flow savings from operating efficiencies and marketing synergies |
| Impact on Financials | Immediate accretion to earnings, free cash flow, and net asset value, with an estimated free cash flow yield of 15% at an $80 WTI oil price |
Rick Muncrief, Devon Energy’s CEO, aptly summarized the acquisition’s importance: “This acquisition aligns perfectly with our strategic model of disciplined cash returns, reinforcing our scale, profitability, and commitment to sustainable operations.”
Don’t miss out on this monumental move. Stay informed about Devon Energy’s latest updates and how they could redefine the oil and gas landscape. For more insights, visit their official press release.
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