Sumitomo to invest $1.4bn in Devon Energy’s assets in the US

Sumitomo Corporation will invest $1.4bn to acquire a 30% stake in Devon Energy assets located in the US, pursuant to an agreement between the two companies.

The company will acquire approximately 650,000 net acres in the Cline Shale and the Midland-Wolfcamp Shale.

Devon Energy president and chief executive officer John Richels said the transaction demonstrates the value embedded in its high-quality portfolio.

"This arrangement will materially enhance Devon’s future returns and improve our capital efficiency," said Richels.

"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."

Sumitomo will invest $340m in cash upon closing as per the terms of the agreement, it will invest an additional $1.025bn in the form of a drilling carry.

The company will pay 79% of the overall drilling and completion costs during the carry period.

A total of 40 wells will be drilled under the current plan, and drilling carry will be realised by 2014.

As the operator, Devon will be responsible for commercially marketing all production from these plays into the North American market.

The transaction is expected to close in the third quarter of 2012.