Devon Energy announces $1.4 billion joint venture
OKLAHOMA CITY -- Devon Energy Corporation today announced it has signed an agreement with Sumitomo Corporation whereby Sumitomo will invest $1.4 billion in exchange for 30 percent of Devon’s interest in approximately 650,000 net acres in the Cline Shale and the Midland-Wolfcamp shale.
“This transaction once again demonstrates the value embedded in our high-quality portfolio,” said John Richels, Devon’s president and chief executive officer. “This arrangement will materially enhance Devon’s future returns and improve our capital efficiency. It will also further enhance our financial strength. For quite some time we have had a strong working relationship with Sumitomo and look forward to a mutually beneficial joint venture.”
Under the terms of the agreement, Sumitomo will invest $340 million in cash upon closing and an additional $1.025 billion will be invested in the form of a drilling carry. The drilling carry will fund 70 percent of Devon’s capital requirements, resulting in Sumitomo paying 79 percent of the overall drilling and completion costs during the carry period.
For the full-year 2012, the partnership expects to drill approximately 40 gross wells. Based on the current work plan, Devon expects the entire $1.025 billion carry to be realized by mid-2014.
Devon will serve as operator and is responsible for commercially marketing all production from these plays into the North American market. The effective date of this transaction is January 1, 2012. Closing of the transaction is expected to occur in the third quarter of 2012.