Using our North America Well Analysis Tool, we look more closely at the assets acquired by Devon Energy this week in a combination of deals across the Anadarko and Powder River basins. Our latest analysis and valuations show the potential promise of the deal, but success will depend on continued operational improvements.
In a series of major transactions this week, Devon Energy acquired more than 330,000 net acres across the Anadarko and Powder River basins for US$2.5 billion in equity and cash. Its affiliate, EnLink Midstream Partners, also acquired Tall Oak Midstream for US$1.55 billion.
The deals are bold moves given spot commodity pricing, but our analysts see potential success resulting from operational improvements to boost efficiencies and production within the acquired plays.
Devon's deal with Felix Energy netted 80,000 acres across the Woodford and Meramec plays within the Anadarko Basin (STACK sub-play), with a purchase price of US$1.9 billion. We value the acquisition at approximately US$1.7 billion in our base case scenario, but believe it fits well into Devon's portfolio.
A second deal in which Devon acquired 253,000 net acres in the Powder River Basin for US$600 million more than doubles its current holdings. Our current valuation for this asset comes in at approximately US$630 million, contingent upon an aggressive drilling schedule and cost improvements within the basin.
EnLink's acquisition of Tall Oak Midstream, which owns gathering and processing facilities in the Anadarko Basin, brings the total investment of Devon and its affiliates to approximately US$4 billion — a material bet on tight oil at a challenging time for the theme. Future success, however, will require a sharp focus on operational efficiency and enhanced productivity.
You can find more detailed analysis on these acquisitions in our forthcoming Deal Insight.
As well as being available as part of our subscription service, our full US Upstream Week In Brief report is available to purchase. This week's brief examines the implications of Marathon's second dry hole in the GoM Lower Tertiary, the continued strength of Utica production, questions sparked by the EIA Drilling Productivity Report, and the latest M&A activity in the US Lower 48.
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