Devon Energy Corp., the biggest independent U.S. oil and natural- gas producer, may beat a target of generating as much as $7.5 billion from asset sales as Brazil tightens its grip on the oil industry, boosting the value of the company's holdings in the country, Oppenheimer & Co. said.
Oklahoma City-based Devon, which said Nov. 16 it plans to sell all its offshore and foreign assets to focus on U.S. and Canada drilling, may get more than $1 billion for its Brazilian fields, Fadel Gheit, managing director of oil and gas research with Oppenheimer in New York, said in a Jan. 8 interview. Devon aims to raise $4.5 billion to $7.5 billion this year after taxes by selling properties from Brazil to the Gulf of Mexico.
Proposed changes to Brazil's oil industry will give state- run Petroleo Brasileiro SA a 30 percent stake in all new exploration contracts in the so-called pre-salt region, boosting the value of areas that have already been licensed to Devon, Repsol YPF SA and Woodside Petroleum Ltd. Such blocks would give investors access to reserves near the largest oil discovery in three decades without partnering with the state.
"They came in before the market heated up," Gheit said. "The Brazilian Senate is not going to be as generous with lease terms as in the case of Devon," he said. The "uniqueness" of the assets will boost proceeds to "at least $7.5 billion and maybe more," said Gheit, who rates the shares "outperform."
Brazil's government in 2007 removed some offshore blocks, or tracts of land that are licensed to companies for exploration and production of oil, from an auction after it was discovered that crude deposits may sit below a layer of salt. Brazil's next oil block auction set for 2010 won't include pre-salt blocks.
Devon has seven offshore exploratory blocks in Brazil for sale, six of which are in the pre-salt region.
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