Devon CEO: No Interest In Acquisitions, Despite Abundant Cash
HOUSTON - Devon Energy Corp. is not planning to make acquisitions despite having an abundance of cash, the company's top executive said Wednesday.
"People think we need to do an acquisition to grow. We don't," Chief Executive John Richels told analysts in a presentation. "We have no interest in acquiring assets."
Richels spoke in an effort to soothe concerns of some investors who believe the company is likely to make a dilutive acquisition with the $7.1 billion cash it has in hand. Richels said he and his management team haven't thought "for five minutes" to make a large acquisition, he added.
Devon plans to invest its cash in ways that make financial sense for the company, such as increasing its capital expenditure for production and exploration projects that have significant potential to yield oil, Richels said.
Oklahoma City's Devon said it plans to spend $6.1 billion to $6.5 billion this year, up $1 billion from its original budget. The company expects to spend $7.8 billion in exploration and production projects by 2016.
Devon also expects a compound annual production growth from 2012 to 2016 of 16% to 18%. Oil and gas output is expected to increase to 340 million barrels of oil equivalent from the 255 million barrels of oil equivalent it expects to produce in 2012, the company said.
The company's projections assume WTI oil prices of $105 a barrel and natural gas prices of $2.75 a million British thermal units this year. Devon assumes WTI crude prices will be around $95 a barrel and gas prices at $4.40 a MMBtu by 2016.
On the exploration side, Devon said it has identified a number of new promising shale oil areas where it plans to increase its footprint. The company said plans to drill 15 wells in the oil-rich Cline Shale in West Texas where it has 500,000 acres. Devon is also building a "significant" position of 250,000 acres in an additional undisclosed shale oil formation, the company said.
Devon expects an additional joint venture transaction in 2013 that will be about half the size of the deal it recently announced with China Petroleum & Chemical Corp., better known as Sinopec. In February, both companies entered into a $2.5 billion deal for a one-third stake in five U.S. shale oil and gas fields.
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