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Devon Energy said on Monday it had entered into a deal to acquire private equity firm EnCap-owned Grayson Mill Energy's Williston basin business in a cash-and-stock deal worth $5 billion, as it aims to cash in on high stock valuations to grow acreage.
The deal value includes $3.25 billion in cash and $1.75 billion in stock.
A consolidation in the U.S. energy sector that triggered $250 billion worth of deals in 2023 has bled into this year, with companies seeking opportunities to deploy their capital and expand their reserves.
This has created a favorable environment for private equity firms like EnCap to cash out on assets. In June, the firm sold some shale assets of oil and gas producer XCL Resources for about $2 billion.
Reuters reported in January that the firm planned to sell Grayson Mill, a major Bakken-focused energy producer formed by EnCap in 2016, with operations in North Dakota, Montana, and the Powder River Basin in Wyoming.
Devon said the deal, expected to close by the end of the third quarter, will add 307,000 net acres to the company's position in the Williston Basin.
The energy producer expects its output to grow to 765,000 barrels of oil equivalent per day (boepd) from 664,000 boepd.
The acquisition helps extend Devon's drilling inventory in the Williston Basin, Scott Hanold, analyst at RBC Capital Markets, said, but added that the price seems a bit high.
"Given the relative maturity of the basin, assets in the Williston Basin generally are not as competitive compared to places like the Permian Basin."
The company's board of directors also expect to expand its share repurchase by 67% to $5 billion through mid-year 2026, while the acquisition is expected to add to the company’s dividend payout starting 2025.
(Reporting by Seher Dareen in Bengaluru; Editing by Anil D'Silva and Tasim Zahid)