Devon Energy secures Acreage in Anadarko basins

Devon Energy secures Acreage in Anadarko basins

Devon Energy has agreed to acquire 80,000 net surface acres, with up to 10 prospective zones, in the Anadarko basin STACK play from privately held Felix Energy, a portfolio company of EnCap Investments, for $1.9 billion reports WorldOil

In a separate transaction, the company has also agreed to acquire 253,000 net acres in the Powder River basin for $600 million. The transactions will be funded with approximately $1.35 billion of Devon equity issued to sellers and approximately $1.15 billion of cash on hand and borrowings.

“These acquisitions materially core up our position in two of the best emerging North America development oil plays and further upgrade our asset portfolio,” said Dave Hager, president and CEO. “In an effort to focus exclusively on our very best resource plays, strengthen our already solid financial position and drive investor value, we are also announcing our intent to divest non-core assets. This will sharpen our focus on what we believe to be the best oil and gas assets in North America.”

EnLink advantage

In a related transaction announced separately, EnLink Midstream agreed to acquire Tall Oak Midstream, a portfolio company for EnCap Flatrock Midstream, for $1.55 billion. Tall Oak’s gathering and processing assets are strategically located in the core area of the STACK play, and the vast majority of the Felix acreage position is dedicated to this midstream infrastructure.

“We are excited about the opportunity presented with the Felix and Tall Oak acquisitions,” said Hager. “The synergistic relationship of these assets and our ownership in EnLink allowed the simultaneous acquisition of Felix’s upstream business by Devon with EnLink acquiring the associated midstream infrastructure of Tall Oak. This collaboration was a competitive advantage in securing these top-tier assets and a testament to the strength of our partnership, which is well positioned to benefit from the significant upside the resource-rich STACK play offers.”

STACK play

The 80,000 net surface acres being acquired in the STACK play are located in Blaine, Canadian and Kingfisher counties in Oklahoma, immediately northeast of Devon’s legacy STACK position. Situated in the over-pressured oil window of the play, these properties include low-risk development targets in up to 10 intervals including multiple landing zones in the Meramec, Osage and Woodford formations. Given the potential for numerous landing zones and tighter infill spacing opportunities across this high-quality acreage, Devon has identified 1,400 risked locations, with an unrisked inventory of more than 3,000 locations.

The acquired properties include production of approximately 9,000 boed and an estimated risked resource of approximately 400 MMboe. Based on an estimated value of the existing daily production in excess of $300 million, the company estimates it is paying approximately $20,000 per surface acre or approximately $4/boe of risked resource.

“This acquisition has captured a significant position in the most economic portion of the STACK oil window, which is emerging as one of the top resource plays in North America,” said Tony Vaughn, executive V.P. of exploration and production. “Combined with our current acreage position we have created a best-in-class STACK position that provides significant resource and drilling inventory to support visible growth for many years to come.”

Upon closing of the Felix assets in early 2016, Devon’s daily production in the STACK play, which includes the Cana-Woodford development, will increase to an industry-leading total of nearly 80,000 boed. The company now has exposure to 430,000 net surface acres in the STACK with 5,300 risked locations.

Powder River basin

The acquired Powder River basin acreage is located to the south of Devon’s legacy position in Wyoming and includes production of 7,000 boed, with approximately 85% oil. This leasehold resides in the core of the Powder River oil fairway and is most prospective for the Parkman, Turner and Teapot formations. The contiguous acreage allows for extended-reach horizontal drilling and the company has conservatively identified 500 development-ready locations with potential for as many as 2,700 unrisked locations as appraisal drilling further derisks multiple formations in the oil fairway.

“This opportunistic transaction adds scale and scope to our Powder River basin operations, creating the largest and highest quality acreage position in the industry,” said Vaughn.

After deducting the value of current production at $30,000 per flowing barrel and $100 million of midstream infrastructure, Devon secured the undeveloped leasehold at roughly $1,100 per acre.

Upon closing the transaction, Devon’s daily production from its Rockies business unit will increase to more than 30,000 boed, and its Powder River basin leasehold position will more than double to 470,000 net acres with stacked-pay potential across multiple oil-prone formations. The size of the opportunity is significant with several billion barrels of unrisked resource across the basin.

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