Devon Energy to Acquire Mitchell Energy

Devon Energy will acquire Mitchell Energy for cash and stock. With the acquisition, Devon will become the second largest independent natural gas producer in the United States.

"The Mitchell properties fit perfectly with our long-term objectives," said J. Larry Nichols, Chairman, President and CEO of Devon. "The reserves are concentrated -- nearly all in Texas, 71 percent natural gas with an impressive growth curve. In addition to the oil and gas properties, we will also acquire one of the largest suites of U. S. midstream assets of any independent. We believe this transaction can deliver significant growth in per share value, as Devon's shareholders have come to expect."

George P. Mitchell, Chairman and CEO of Mitchell, said, "This transaction provides important benefits to our shareholders and employees. It provides significant value while retaining a unique opportunity to participate in theexciting upside potential of Devon. Our shareholders and employees will benefit from becoming part of a larger, stronger and more diversified company."

Under the terms of the agreement, Mitchell's shareholders would receive, for each Mitchell common share, $31 cash and 0.585 of a share of Devon common stock. This requires Devon to pay $1.6 billion and issue 30.2 million shares to Mitchell's shareholders. Based upon Devon's closing stock price of $50.26 on August 13, 2001, the total value of the cash to be paid and stock to be issued to Mitchell shareholders would be approximately $3.1 billion. Devon would also assume approximately $400 million of debt and other obligations of Mitchell. Devon expects the acquisition to be accounted for using the purchase method of accounting.

The board of directors of each company has unanimously approved the merger. George P. Mitchell, Chairman and CEO of Mitchell, and his wife own approximately 46 percent of Mitchell's outstanding common stock. Mr. and Mrs. Mitchell have agreed to vote their shares in favor of the acquisition by Devon. After completion of the transaction, Mr. and Mrs. Mitchell will own approximately nine percent of Devon's common shares. Todd Mitchell, son of George P. Mitchell, will join Devon's board of directors.

Completion of the transaction will cause Devon's outstanding shares to increase from 126 million to 156 million. Devon's capital structure after the transaction will include $150 million in preferred securities, about $3.4 billion of net long-term debt and other long-term liabilities of $340 million. The $3.4 billion debt figure excludes certain Devon debentures that are exchangeable into Chevron common stock. (Devon owns 7.1 million shares of Chevron.)

The transaction is subject to approval by the shareholders of both companies as well as expiration of the Hart-Scott-Rodino waiting period and other customary closing conditions. Both Devon and Mitchell intend to hold special shareholders' meetings as soon as practicable following completion of regulatory review. Completion of the transaction is expected in the fourth quarter of 2001.


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