American oil and gas producer Devon Energy has signed a deal worth $5bn to acquire the Williston Basin operations of Grayson Mill Energy, a Houston-based exploration and production company backed by Encap Investments.
The consideration is made up of a cash component of $3.25bn and $1.75bn of stock.
Devon Energy president and CEO Rick Muncrief said: “The acquisition of Grayson Mill is an excellent strategic fit for Devon that allows us to efficiently expand our oil production and operating scale while capturing a meaningful runway of highly economic drilling inventory.
“This transaction also creates immediate value within our financial framework by delivering sustainable accretion to earnings and free cash flow that will result in higher distributions to shareholders over time.”
Devon Energy, which is listed on the New York Stock Exchange (NYSE), has a multi-basin portfolio spread over five core areas, including the Williston Basin.
The deal will expand the company’s presence in the Williston Basin by 307,000 net acres, with a 70% working interest. Production from these properties is anticipated to remain steady at about 100,000 barrels of oil equivalent per day in 2025, with oil comprising 55% of this output.
Moreover, the acquisition will increase Devon Energy’s asset base by adding 500 gross locations and 300 high-quality refracturing candidates that will compete effectively for capital within the company’s portfolio.
On a pro forma basis, Devon Energy estimates a resource inventory lifespan of up to 10 years in the Williston Basin, assuming a consistent development pace of three operated rigs.
The acquired assets will also enhance Devon Energy’s operating margins in the Williston Basin, supported by ownership in 1,529km of gathering systems, a network of disposal wells, and crude storage terminals.
Subject to customary terms and conditions, the deal is anticipated to be wrapped up by the end of Q3 2024.
Devon Energy has engaged Citi as its financial adviser for the deal while Kirkland & Ellis is acting as legal adviser.
