The merged company will be named Devon Energy Corporation and will be headquartered in Oklahoma City. Devon will become the largest U.S.-based independent oil and natural gas producer with production of approximately 650,000 equivalent barrels of oil per day, and upon completion of the merger, will have an enterprise value of approximately $20 billion.
"Combining our two companies creates a balanced portfolio with North American and international assets, increased oil and gas production capabilities and greater internal growth opportunities through an active exploration program," said J. Larry Nichols, Devon's chairman, president and chief executive officer. "Ocean's high-impact, deepwater projects and complementary management skills make this a win-win transaction."
"This merger combines the strong North American portfolio of Devon with the growth profile of Ocean," said James T. Hackett, chairman, president and chief executive officer of Ocean. "As part of a much larger organization, our shareholders will benefit from the superior access to capital necessary to accelerate key exploration and development opportunities. It also provides a commodity mix weighted positively toward North American natural gas and creates a better balance between exploration and exploitation, minimizing the risk associated with high-impact exploration."
Following the merger, Mr. Nichols will retain the positions of chairman and chief executive officer of Devon. Mr. Hackett will be named president and chief operating officer. The board of directors will consist of nine members from Devon and four members from Ocean.
Under the terms of the merger agreement, Ocean's shareholders will receive 0.414 shares of Devon common stock for each common share of Ocean. The exchange ratio is based upon the relative market prices of the two securities over the last 30 trading days. This will require Devon to issue 73.4 million new shares to Ocean's shareholders. Based upon Devon's closing stock price of $48.23 per share on February 21, 2003, the total value of the stock to be issued will be approximately $3.5 billion. The aggregate value of the transaction, including the assumption of Ocean's debt and other obligations, is approximately $5.3 billion. The transaction is expected to be non-taxable to the shareholders of both companies.
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 Ocean intend to hold special shareholders' meetings as soon as practicable following completion of regulatory review.
The agreement between the companies contains reciprocal provisions for the payment of termination fees under certain circumstances.
The boards of directors of both companies have approved the merger. Completion of the transaction is expected in the second or third quarter of 2003.
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