Devon Energy has unveiled its plan to strategically reposition Devon as a high-growth North American onshore company. Devon intends to divest all of its Gulf of Mexico and international assets. The company plans to direct proceeds to its high-return U.S. and Canadian onshore portfolio and to retire debt.
"Devon's success has led to an overabundance of opportunities, and this repositioning will allow us to optimize value for our shareholders," said J. Larry Nichols, chairman and chief executive officer. "We do not believe that the value of our high-quality Gulf and international assets is being adequately reflected in our stock price. By monetizing these assets, we will realize their full value, allowing us to unleash the growth potential that resides within our world-class onshore assets."
"Following the divestitures, Devon will be uniquely positioned to deliver high organic growth on a sustainable basis, funded entirely with internally generated funds. Furthermore, we expect Devon to emerge with an even stronger balance sheet and one of the lowest overall cost structures in our peer group," added Nichols.
Expected Timing, Proceeds and Pro-Forma Impacts
Devon expects to have data rooms open for all of the divestiture assets and commence the divestiture process in the first quarter of 2010. The company expects to complete the divestitures throughout 2010 and to have finished the process by year-end.
Devon believes the divestitures will generate after-tax proceeds of $4.5 billion to $7.5 billion. The company expects the repositioning to be highly accretive to earnings, cash flow, production and reserves beginning in 2011.
Relative Size and Product Mix of Gulf of Mexico and International Assets
Based on estimated year-end 2009 proved reserves, Devon's Gulf of Mexico and international properties comprise approximately seven percent of Devon's company-wide proved reserves of 2.8 billion barrels of oil equivalent (Boe). If the sale of the Gulf of Mexico and international assets had occurred in 2009, Devon's estimated year-end 2009 proved reserves would have been 2.6 billion Boe or some 200 million Boe greater than year-end 2008 levels.
Oil and natural gas liquids account for approximately 43 percent of company-wide estimated proved reserves at year-end 2009. Pro forma for the divestiture of the Gulf of Mexico and international assets, oil and natural gas liquids account for 41 percent of the total. Accordingly, the company's overall balance between liquids and natural gas will change only slightly as a result of this repositioning.
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