On Friday, Devon Energy Corp. (DVN) sold its Panyu field located in offshore China to China National Offshore Oil Corporation. Production from the Panyu field averaged approximately 12,000 barrels of oil per day. The offshore oil field sale fetched a price of $515 million or $370 million after taxes to Devon.
Devon is in the process of realigning its assets to focus more on the North American onshore market. As a part of this strategic repositioning, it is divesting all of its offshore assets. The company expects proceeds from divestitures to total more than $10 billion or approximately $8 billion, net of tax.
Additionally, Devon recently exited from Gulf of Mexico operations after divesting its shell assets to Apache Corp. (APA) for $1.05 billion, or approximately $840 million after tax.
Devon intends to utilize the sale proceeds from assets divestiture toward development of its North American onshore properties, reducing the debt level and buying back shares. Once the repositioning is complete, it would land up with more liquidity and one of the most robust balance sheets among its peers.
Devon’s nearest peer ConocoPhillips (COP) is also undergoing a divestiture program. ConocoPhillips expects to complete its $10 billion divestiture program over a 2-year period, with 60% – 80% of the proceeds coming from the upstream segment. In 2010, ConocoPhillips expects to divest its 9% interest in Syncrude, the bottom 10% of its Lower-48/Canadian asset base, its interest in the REX Pipeline and downstream marketing assets for net sale proceeds of $5 – $6 billion.
Devon’s leverage to some of the best North American natural gas assets, its deep inventory of repeatable projects, significant exposure to emerging plays, consistent production profile and a low-cost structure will provide upside over the long run. However, we expect the present constrained commodity environment to continue weighing on the company’s financial performance, at least in the near term. We thus remain neutral on Devon.
Read the full analyst report on “DVN”
Read the full analyst report on “APA”
Read the full analyst report on “COP”
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