Devon Energy Announces Bolt-On Acquisition in the Eagle Ford
August 09 2022 - 6:55AM
Devon Energy Corp. (NYSE: DVN) announced today it has entered into
a definitive purchase agreement to acquire Validus Energy, an Eagle
Ford operator, for total cash consideration of $1.8 billion. The
transaction is subject to customary terms and conditions and is
expected to close at the end of the third quarter of 2022, with an
effective date of June 1, 2022.
Rick Muncrief, president and CEO stated, “The Validus
acquisition captures a top-tier oil resource with a meaningful
runway of highly economic inventory that is complementary to our
existing footprint in the Eagle Ford. This accretive transaction
also enhances our financially-driven strategy that is designed to
deliver per-share financial growth and accelerate the return of
capital to our shareholders.”
TRANSACTION HIGHLIGHTS
- Immediately accretive to financial metrics –
The transaction is attractively valued at 2-times cash flow, with a
free cash flow yield of 30 percent at strip pricing over the next
year. The acquisition is expected to be immediately accretive to
all relevant per-share metrics in the first year, including
earnings, cash flow, free cash flow and net asset value.
- Increases cash-return outlook – Due to the
accretive nature of this transaction to free cash flow, the outlook
for Devon’s variable dividend increases by up to 10 percent on a
per-share basis at strip pricing. In addition to higher dividend
payouts, the incremental free cash flow from this acquisition
positions the company to accelerate the return of excess cash to
shareholders through the ongoing execution of its $2.0 billion
share repurchase program.
- Enhances Eagle Ford asset quality and scale –
This acquisition secures a premier acreage position of 42,000 net
acres (90% working interest) adjacent to Devon’s existing leasehold
in the basin. Validus’s current production is approximately 35,000
Boe per day (70 percent oil), with volumes expected to increase to
an average of 40,000 Boe per day over the next year. The
transaction also adds 350 repeatable drilling locations in the core
of the Karnes Trough oil window along with 150 high-quality refrac
candidates. This highly economic inventory positions the company’s
Eagle Ford assets to sustain its high-margin production and free
cash flow generation for several years.
- Captures high-margin production – The acquired
assets provide high cash operating margins through access to
premium Gulf Coast pricing and low per-unit expenses. With enhanced
scale in the basin, Devon expects to realize $50 million in average
annual cash flow savings from capital efficiencies, operating
improvements, and marketing synergies.
- Maintains top-tier balance sheet – Devon’s pro
forma leverage metrics will remain relatively unchanged, exiting
the year with an expected net debt-to-EBITDAX ratio of 0.4 times at
strip pricing. This balance sheet strength preserves the company’s
financial and operational flexibility and allows for the
accelerated return of capital to shareholders.
Supplemental slides covering the transaction are available on
the company’s website at www.devonenergy.com.
ABOUT DEVON ENERGY
Devon Energy is a leading oil and gas producer in the U.S. with
a premier multi-basin portfolio headlined by a world-class acreage
position in the Delaware Basin. Devon’s disciplined cash-return
business model is designed to achieve strong returns, generate free
cash flow and return capital to shareholders, while focusing on
safe and sustainable operations. For more information, please visit
www.devonenergy.com.
Investor Contacts |
Media
Contact |
Scott Coody, 405-552-4735 |
Lisa Adams, 405-228-1732 |
Chris Carr, 405-228-2496 |
|
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements within
the meaning of the federal securities laws. Such statements are
subject to a number of assumptions, risks and uncertainties, many
of which are beyond the control of the company. These risks
include, but are not limited to: the delay or failure to consummate
the transaction due to unsatisfied closing conditions or otherwise;
the ultimate amount of cash consideration to be paid in the
transaction due to purchase price adjustments or otherwise; the
risk that, if acquired, the Validus assets do not perform
consistent with our expectations, including with respect to future
production or drilling inventory; and the other risks identified in
the Company’s 2021 Annual Report on Form 10-K and its other filings
with the Securities and Exchange Commission (SEC). Investors are
cautioned that any such statements are not guarantees of future
performance and that actual results or developments may differ
materially from those projected in the forward-looking statements.
The forward-looking statements in this press release are made as of
the date hereof, and the company does not undertake any obligation
to update the forward-looking statements as a result of new
information, future events or otherwise.
NON-GAAP DISCLOSURES
This press release includes non-GAAP (generally accepted
accounting principles) financial measures. Such non-GAAP measures
are not alternatives to GAAP measures, and you should not consider
these non-GAAP measures in isolation or as a substitute for
analysis of results as reported under GAAP. For additional
disclosure regarding such non-GAAP measures, including
reconciliations to their most directly comparable GAAP measure,
please refer to Devon’s second-quarter 2022 earnings materials and
related Form 10-Q filed with the SEC.
CAUTIONARY NOTE ON RESERVES AND RESOURCE
ESTIMATES
The SEC permits oil and gas companies, in their filings with the
SEC, to disclose only proved, probable and possible reserves. Any
reserve estimates provided in this press release that are not
specifically designated as being estimates of proved reserves may
include estimated reserves or locations not necessarily calculated
in accordance with, or contemplated by, the SEC’s latest reserve
reporting guidelines. You are urged to consider closely the oil and
gas disclosures in the Company’s 2021 Annual Report on Form 10-K
and our other reports and filings with the SEC.
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