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Devon completes divestment program with $1.1B Access pipeline stake sale


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Devon completes divestment program with $1.1B Access pipeline stake sale

struck a dealto sell its 50% ownership interest in the Access pipeline to Wolf Midstream for$1.1 billion, topping off Devon's program to unload assets for billions ofdollars in cash.

Devonsaid the agreement also includes the potential for an incremental payment ofapproximately $120 million with the sanctioning and development of a newthermal oil project on Devon's Pike lease in Alberta.

Underthe terms of the sale agreement, which is expected to close in the thirdquarter, Devon's thermal oil acreage is dedicated to the Access pipeline for aninitial term of 25 years. A market-based toll will be applied to the company'sthree Jackfish projects, meaning Devon expects its lease operating expense atthe complex to increase by about $100 million per year.

"Theagreement also includes the potential for the Access Pipeline toll to bereduced by as much as 30 percent with the development of new thermal-oilprojects in the future," Devon said. "The company's next potentialproject is the first phase of Pike, which is located immediately adjacent tothe Jackfish complex. Devon is the operator of this joint venture leaseholdwith a 50 percent working interest."

DaveHager, Devon's president and CEO, said the company has now surpassed itsobjective of divesting $3 billion worth of assets. The "highly-accretive"sale of the company's stake in Access, he said, puts total sales at $3.2billion.

"Thedivestiture proceeds significantly strengthen our investment-grade balancesheet and position us to further accelerate investment in our best-in-classU.S. resource plays, led by the STACK and Delaware Basin," he said.

Thedeal appears to be receiving a positive, if measured, response from analysts.Capital One Securities analyst Phillips Johnston said the sale is "modestlypositive" for Devon.

"Theprice tag is above Street estimates of [approximately] $1 billion. There hasbeen some worry since the sale has been delayed," he said. "The salewill modestly compress [Devon's 2017 and 2018] leverage ratios from 3.1x/2.7xto 2.8x/2.4x."

Guggenheimanalyst Subash Chandra said Devon is "free at last" from assets thatwere no longer in its major plans.

"Atthis point, [Devon] has jettisoned virtually all of its non-core upstreamassets that couldn't be maintained within cash flows and its midstream assets,"he said. "The increased activity in the STACK and Delaware will be anincremental positive for Devon."