Devon Energy Corp. (DVN) on July 31 announced it has entered into a definitive agreement to monetize its Lavaca County assets in the Eagle Ford play.
Houston-based Penn Virginia Corp. said it will acquire Devon’s Eagle Ford assets, located primarily in Lavaca County, for $205 million in cash. Penn Virginia said expects the purchase price will be adjusted downwards by approximately $15 million to reflect estimated net cash flows from the effective date to closing, resulting in a net purchase price of approximately $190 million. The acquisition will be funded with new $150 million of committed debt financing and borrowings under the company’s credit facility.
Combined with other minor asset sales completed across its U.S. operations, proceeds from the Devon’s recently announced $1 billion divestiture program have now reached $340 million. The Lavaca County transaction is subject to customary terms and conditions and is expected to close by the end of 2017.
“These highly-accretive asset sales are an important step in executing on our $1 billion divestiture program over the next year,” said Dave Hager, president and CEO of Oklahoma City-based Devon. “The divestiture proceeds will further strengthen our investment-grade financial position and provide us additional flexibility to build operational momentum across our top-tier U.S. resource plays.”
Net production from the divested properties averaged approximately 4,000 oil-equivalent barrels (Boe) per day (60 percent oil). Field-level cash flow accompanying these assets, which excludes overhead costs, is projected to approximate $30 million annually. Proved reserves associated with these properties amounted to less than 10 million Boe at Dec. 31, 2016. The company expects to incur minimal taxes associated with these transactions.
The company is continuing efforts to sell Devon’s assets in Johnson County, just south of Fort Worth. The Johnson County assets represent approximately 20 percent of the company’s Barnett Shale net production and cash flow. Devon is actively marketing these assets and expects to complete its non-core divestiture program over the next year, according to a company news release.
RBC Richardson Barr acted as a financial adviser to Devon on the Lavaca County transaction.