Sumitomo buys into Devon Energy’s shale acreage

Sumitomo Corp. is to invest US$ 1.4 billion in exchange for 30% of Devon’s interest in approximately 650,000 net acres in the Cline Shale and the Midland-Wolfcamp Shale.

 “This transaction once again demonstrates the value embedded in our high-quality portfolio,” said John Richels, Devon’s president and chief executive officer. “This arrangement will materially enhance Devon’s future returns and improve our capital efficiency. It will also further enhance our financial strength. For quite some time we have had a strong working relationship with Sumitomo and look forward to a mutually beneficial joint venture.”

Under the terms of the agreement, Sumitomo will invest US$ 340 million in cash upon closing and an additional US$ 1.025 billion will be invested in the form of a drilling carry. The drilling carry will fund 70% of Devon’s capital requirements, resulting in Sumitomo paying 79% of the overall drilling and completion costs during the carry period. For the full-year 2012, the partnership expects to drill approximately 40 gross wells. Based on the current work plan, Devon expects the entire US$ 1.025 billion carry to be realized by mid-2014.

Devon will serve as operator and is responsible for commercially marketing all production from these plays into the North American market.

Adapted from press release by Peter Farrell.

Read the article online at: https://www.worldpipelines.com/business-news/02082012/sumitomo-buys-into-devon-energy%E2%80%99s-oil-and-gas-shale-acreage/