The Oklahoma-based oil and gas producer Devon Energy Corp. agreed to sell its ownership stakes in EnLink Midstream Partners LP, EnLink Midstream LLC and EnLink Midstream Manager LLC to an affiliate of the fund manager Global Infrastructure Partners for approximately $3.13 billion.
The deal values the stake at 12 times cash flow, based on $265 million of cash distributions contributed by the ownership interests over the past year, according to a June 6 news release. Devon's ownership interests include 115 million units in the general partner EnLink Midstream LLC, and 95 million units in the master limited partnership EnLink Midstream Partners.
The acquisition would result in Global Infrastructure Partners owning 100% equity interest in EnLink Midstream Manager, 64% limited partner equity interest in EnLink Midstream LLC and 23% limited partner equity interest in EnLink Midstream Partners.
The sale is part of Devon's ongoing strategy to simplify its portfolio and is expected to cut Devon's consolidated debt by 40%. Upon deal closing, EnLink Midstream's earnings would no longer be consolidated with Devon's upstream business.
"[Global Infrastructure Partners] has significant expertise and experience in the midstream industry that will enhance and elevate our growth plans," said Michael Garberding, president and CEO of EnLink.
EnLink and Devon intend to maintain a commercial relationship through long-term commercial contracts that would maximize returns in the STACK play and redevelop the Barnett Shale, among other things. Devon also agreed to extend existing fixed-fee gathering and processing contracts for its Bridgeport and Cana gas processing plants with EnLink until 2029.
In connection to the deal, Devon's board of directors approved an increase of $3 billion to the company's $1 billion share repurchase program, representing about 20% of its outstanding common stock. The authorized increase would extend until Dec. 31, 2019, and is conditioned upon the EnLink deal closing. As of April 30, Devon has completed repurchases of 6.2 million shares, worth $204 million.
The deal is scheduled to close in July. Goldman Sachs & Co. LLC acted as financial adviser and Vinson & Elkins LLP acted as legal advisor to Devon on the transaction.
