Must-know points from Devon Energy’s $6 billion acquisition (Part 4 of 6)
Devon Energy’s plans
Devon Energy noted that in conjunction with this acquisition, it would also seek to divest non-core properties. Devon is in the process of marketing certain properties for sale, which is part of how it plans to fund its $6 billion acquisition of GeoSouthern’s Eagle Ford properties. On the conference call surrounding the transaction, the company stated that it plans to sell all of its Canadian conventional assets and other non-core assets in the U.S.
Note that the difference between conventional and unconventional assets refers primarily to the process of extraction. According to an explanation by the Canadian Association of Petroleum Producers, “Conventional gas is typically ‘free gas’ trapped in multiple, relatively small, porous zones in various naturally occurring rock formations such as carbonates, sandstones, and siltstones. However, most of the growth in supply from today’s recoverable gas resources is found in unconventional formations. Unconventional gas reservoirs include tight gas, coal bed methane, gas hydrates, and shale gas. The technological breakthroughs in horizontal drilling and fracturing that have made shale and other unconventional gas supplies commercially viable have revolutionized Canada’s natural gas supply picture.”
Devon has stated that it plans to concentrate in five core areas.
- Heavy oil in Canada
- The Anadarko Basin in the Midcontinent
- The Permian Basin in West Texas
- The Barnett Shale in East Texas
- The Eagle Ford in South Texas
Plus, the company will retain two plays that it classifies as “emerging,” which means they’re in the early stage of proving out and development. The emerging plays include Rockies Oil in Colarado and the Mississippian-Woodford play in Oklahoma. The future Devon will be significantly less natural gas–weighted and more oil-weighted. This is positive for earnings in the current price environment, where oil production generally results in higher margins than natural gas production.
Browse this series on Market Realist:
- Part 1 - Devon Energy agrees to acquire GeoSouthern’s Eagle Ford properties
- Part 2 - Devon Energy’s latest acquisition is in the Eagle Ford “core”
- Part 3 - Was Devon Energy’s new Eagle Ford acquisition a good deal?
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