Devon Energy to Exit West Africa
Devon Energy plans to divest all of its assets in West Africa. The assets include estimated proved reserves of approximately 90 million oil-equivalent barrels (Boe) at December 31, 2006. This represents approximately four percent of Devon's proved reserves. The properties are expected to produce approximately 11 million Boe in 2007.
The most significant producing property to be divested is Devon's interest in the Exxon-operated Zafiro field in Equatorial Guinea. Other producing properties are located in Gabon and Cote d'Ivoire. In total, Devon owns interests in 16 blocks in various stages of production, exploration and appraisal.
"The significant growth opportunities we have developed onshore in North America and in the deepwater Gulf of Mexico are providing compelling rationale for redeploying our financial and intellectual capital in these areas," commented Devon's president, John Richels. "As a result of the West African divestitures, we will sharpen our focus in North America. At the same time we will be concentrating our international operations in Brazil and China, where we have established competitive advantages."
Use of Proceeds
Although Devon believes a good market exists for its West African assets, the after-tax proceeds cannot be predicted with certainty. However, upon closing the sales, Devon expects to use the net proceeds of its West African divestitures to retire commercial paper balances and to resume the company's common stock repurchase program.
With potential share repurchases, Devon does not expect divestitures of its West African assets to have a material impact upon per share results. However, the divestitures are expected to have the following positive impacts:
- Tighter geographic focus,
- Lower overall portfolio risk,
- Improved capital efficiency, and
- Improved financial flexibility.
Timing of Divestitures
The sale process will be managed for Devon by Goldman Sachs & Co. and Scotia Waterous. Data rooms for interested buyers will be opened in London and Houston near the end of the first quarter. Acceptance of bids and completion of purchase and sale agreements are anticipated in the second half of 2007.
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