Devon sheds Eagle Ford assets for $4.2 billion to deepen Permian bet (updated)
UPDATE 3-Devon sheds Eagle Ford assets for $4.2 billion to deepen Permian bet Updates shares, adds background, details from conference call and analyst comment in paragraphs 2, 7-11
By Katha Kalia and Vallari Srivastava
Oct 8 (Reuters) - Devon Energy DVN.N will sell its Eagle Ford assets to Crescent Energy CRGY.N for $4.2 billion, trimming its portfolio to sharpen focus on its core operations in the Permian Basin following the $58 billion merger with Coterra Energy.
Shares of Devon rose 1.8%, while Crescent dropped about 4.3% in morning trade on Thursday.
The Devon-Coterra deal helped create a large-cap producer with a top position in the Permian Basin, and activist investors had urged the board to pursue asset sales, improve capital allocation and revamp executive pay to boost shareholder value.
"Selling a relatively mature asset into a strong commodity price environment improves our go-forward capital efficiency and allows us to accelerate share buybacks, strengthen our balance sheet and increase long-term value for shareholders," Devon Energy CEO Clay Gaspar said.
In August, the company posted its highest quarterly profit since 2022 following the merger and a surge in global oil prices.
The Eagle Ford assets include about 90,000 net acres across South Texas and account for roughly 4% of Devon's total oil-equivalent production.
CRESCENT SEEKS CAPITAL EFFICIENCY
For Crescent, the deal, which is expected to close by year end, strengthens its presence in the Eagle Ford, as shale producers pursue scale and inventory depth.
The acquired assets include nearly 68,000 barrels of oil equivalent per day of net production, the company said.
"We're effectively going to keep activity at about the same level... we're going to deliver effectively the same production with less capital, just more capital efficiency," said Crescent Energy CEO David Rockecharlie in a conference call.
US shale producers have been selling assets to pay down debt after a consolidation wave that has generated more than $450 billion in deals since the start of 2023.
Crescent expects nearly $100 million in annual synergies from the Devon assets, citing operational improvements and efficiencies achieved in previous acquisitions, executives added.
Siebert Williams analyst Gabriele Sorbara said the deal's size could weigh on Crescent by creating a near-term funding overhang.
"That said, the acquisition appears accretive to Crescent, with successful integration, synergy realization and deleveraging potentially providing meaningful upside, consistent with its track record of value creation through prior acquisitions."
(Reporting by Katha Kalia and Vallari Srivastava in Bengaluru; Editing by Joyjeet Das, Tasim Zahid and Sriraj Kalluvila)