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Devon Energy to divest southern position in Barnett Shale for $553M

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Devon Energy to divest southern position in Barnett Shale for $553M

Devon Energy Corp. agreed to sell the southern portion of its Barnett Shale position to an undisclosed buyer for $553 million as it turns its focus towards the Delaware Basin and STACK play.

The assets to be divested are located primarily in Johnson County, Texas, and have a net production currently averaging 200 MMcf of gas-equivalent per day. The sale is expected to close in the second quarter of 2018, Devon said in a March 7 news release. Upon closing, Devon’s remaining position in the shale will reside primarily in Denton, Wise and Tarrant counties of Texas.

JP Morgan Securities LLC acted as financial adviser to Devon while Vinson & Elkins LLP acted as legal adviser.

Devon said that proceeds from asset divestitures related to its 2020 Vision strategic program has reached $1.0 billion in total. The company had noted in the third quarter of 2017 that it will also seek opportunities to sell off noncore assets to reduce debt as it turns its focus on the Delaware Basin and STACK play.

In conjunction with the Johnson County asset sale, Devon launched a tender offer to purchase certain of its debt securities issued by Devon or Devon Financing Co. LLC up to a maximum repurchase amount of $1.0 billion. The notes include the 7.875% debentures due 2031, 7.950% debentures due 2032, 5.850% notes due 2025, 5.600% notes due 2041 and 3.250% notes due 2022, the last of which has been capped at $250 million. At the current share price, the buyback program covers about 6% of Devon's outstanding common stock.

The tender offers are expected to expire on April 3 and holders of securities must validly tender and not validly withdraw their securities on or before the early tender date, set on March 20, to receive the total consideration, which includes the early tender payment of $30 per $1,000 principal amount of securities.

In a separate release, Devon said its board also approved a 33% increase in its quarterly common stock dividend beginning in the second quarter of 2018. The new quarterly dividend rate will be 8 cents per share, compared to the prior quarterly dividend of 6 cents per share. The dividend is payable on June 29 to shareholders of record as of the close of business on June 15.