Devon Energy Corporation (DVN) has announced plans to divest all of its Gulf of Mexico and international assets for net proceeds of about $4.5-$7.5 billion, repositioning itself as a high-growth North American onshore company. The company believes that this repositioning will result in value optimization for its shareholders.
It believes that the value of these assets is not adequately reflected in the stock price. Furthermore, the divestitures would position the company to deliver high organic growth on a sustainable basis, funded entirely by internally generated funds. With the asset sales, we expect Devon to emerge with a stronger balance sheet and flaunt one of the lowest cost structures in its peer group.
Devon expects to begin the asset sale process by first half of 2010 and to complete them by the end of the year. The company plans to use the proceeds to develop its U.S. and Canadian onshore portfolio and to retire debt. Devon expects net debt to be $6.9 billion and $2.5 billion at the end of 2009 and 2010, respectively. It expects net debt to capitalization at year-end 2010 to be 13%.
In 2010, Devon expects its total exploration and production budget to be about $5.2 billion to $5.9 billion, with about $4.1 billion earmarked for its North American onshore business. The assets to be divested represent approximately 11% of our estimated 2009 production of 248 million barrels of oil equivalent (BOE). The company expects combined oil, gas and NGL production to total approximately 229 to 233 million BOE in 2010.
In addition, the company expects its balance between liquids and natural gas to change only slightly as a result of the divestiture. Devon’s Gulf of Mexico and international properties represent about 7% of its company-wide proved reserves of 2.8 billion BOE for 2009.
Oil and natural gas liquids (NGLs) are expected to account for about 43% of Devon’s estimated proved reserves by the end of 2009. Incorporating divestitures, 2009 proved reserves are estimated at 2.6 billion BOE, with oil and NGLs accounting for 41% of proved reserves.
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