In addition, BP will assume Devon’s leases of the Seadrill West Sirius and Transocean Deepwater Discovery drilling rigs for the duration of the contract terms. Devon and BP will also form a heavy oil joint venture to develop BP’s Kirby oil sands leases in Alberta, Canada.
Devon expects closings on the various assets to occur at different times before year-end. The transactions are subject to customary closing conditions and regulatory approvals. Sales proceeds for the assets will be adjusted for revenues, expenses and capital expenditures from January 1, 2010, through the dates of closing.
In order to facilitate the oil sands joint venture, Devon will acquire 50% of BP’s interest in the Kirby oil sands leases. Devon will pay BP $500m at closing and commit to fund an additional $150m of capital costs on BP’s behalf.
Devon will be the operator of the Kirby project, which lies in close proximity to its Jackfish steam-assisted gravity drainage (SAGD) project. Like Jackfish, Kirby is expected to be a multi-stage SAGD development. Devon and BP also agreed to negotiate a long-term heavy crude sales agreement for Devon’s share of Kirby production.
Last year, Devon announced plans to divest its Gulf of Mexico and international assets to focus on its North American onshore assets. The divestiture proceeds will be allocated between the acceleration of development of Devon’s North American onshore properties and debt reduction.
