Devon Energy acquires GeoSouthern’s Eagle Ford oil play assets for $6bn

Devon Energy has acquired GeoSouthern Energy’s assets in the Eagle Ford oil play in DeWitt and Lavaca counties in Texas for $6bn.

Devon Energy has purchased assets including existing production of 53,000 barrels of oil equivalent (boe) a day and 82,000 net acres with at least 1,200 undrilled locations.

Devon Energy president and chief executive officer John Richels said that the acquisition will add another low-risk light oil asset to the company’s North American portfolio.

"Furthermore, this transaction is expected to be immediately accretive to virtually every metric, including cash flow per debt-adjusted share," Richels added.

Located in DeWitt county, the majority of the acreage is derisked, with at least one producing well in each drilling unit.

Devon will venture into the play in full development mode and hopes to substantially grow production in the near term, while also generating significant free cash flow.

Over the next several years, the acquired assets are expected to grow at a compound annual growth rate of 25% and are set to reach a peak production rate of about 140,000boe per day.

The development drilling programme, which is immediately self-funding, is expected to generate annual free cash flows of around $800m, beginning in 2015.

Subject to customary purchase price adjustments, terms and conditions, the transaction is expected to close in the first quarter of 2014.

GeoSouthern will continue to operate all of its other assets in the Texas Gulf Coast region and other areas and GeoSouthern’s corporate partner Blackstone Group will exit its stake in the company through the transaction.

In January 2011, Blackstone’s two private equity funds and affiliates of GeoSouthern formed a joint venture partnership to accelerate the expansion, drilling and development of its position in the Eagle Ford shale in South Central Texas.

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Image: The majority of the Eagle Ford acreage is located in DeWitt County. Photo: courtesy of Victor Habbick / FreeDigitalPhotos.net.