Devon Energy Corporation (DVN) has agreed to sell three of its Gulf of Mexico assets to Maersk Oil for $1.3 billion. The divestiture would include Devon’s 50% interest in the Cascade project and its 25% interests in the Jack and St. Malo projects. All three projects are located in the deepwater Walker Ridge federal lease area offshore Louisiana.
The divestiture of these assets marks the start of Devon’s initiative to reposition itself into a pure North American onshore company. In November 2009, Devon announced plans to divest its Gulf of Mexico and international assets. The company plans to use the proceeds from these divestitures for debt reduction and to accelerate growth of its North American onshore assets.
Devon estimates to reduce its 2010 capital expenditure budget by about $400 million by off-loading its Gulf of Mexico assets. After-tax proceeds from this transaction are expected to total $1.1 billion. The company estimates the aggregate after-tax proceeds from the planned divestitures, including this transaction, to be $4.5 billion to $7.5 billion.
The effective date for the divestiture is Jan 1, 2010, with closing expected by Feb 1, 2010. The closing is subject to approval of other working interest holders, fulfillment of closing conditions and regulatory approvals. The company expects to begin with discussions for all the remaining divestiture assets in the first quarter of 2010.
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