Morgan Stanley, Goldman Advise Devon Energy in GeoSouthern Assets Buy
Devon Energy announced Morgan Stanley and Goldman, Sachs & Co. served as financial advisors in a transaction in which it will acquire GeoSouthern Energy’s assets in an Eagle Ford oil play for $6 billion in cash.
Jefferies & Company served as financial advisor to GeoSouthern.
Skadden, Arps, Slate, Meagher & Flom served as legal advisor. Simpson Thacher & Bartlett served as legal advisor to GeoSouthern.
Acquired assets include current production of 53,000 barrels of oil equivalent per day and 82,000 net acres with at least 1,200 undrilled locations. The risked recoverable resource is estimated at 400 million barrels of oil equivalent, the majority of which is proved reserves.
GeoSouthern will continue to operate all of its other assets in the Texas Gulf Coast region and other areas. The Blackstone Group, GeoSouthern’s corporate partner, will exit its stake in the company through this transaction.
“With this transaction, we have secured a premier acreage position in the very best part of the world-class Eagle Ford oil play. This acquisition enhances our already strong North American portfolio by adding another low-risk, light oil asset that provides outstanding well economics and self-funded growth,” said John Richels, Devon’s president and chief executive officer. “Furthermore, this transaction is expected to be immediately accretive to virtually every metric, including cash flow per debt-adjusted share.”
The acquired Eagle Ford acreage is located in DeWitt and Lavaca counties in Texas and is largely contiguous, with most of the position held by production. The acreage position is located in the best part of the play, as evidenced by the highest average initial production rates in the entire play and average estimated ultimate recoveries in DeWitt County exceeding 800,000 BOE per well.
The majority of the acquired acreage is located in DeWitt County and is derisked, with at least one producing well in each drilling unit. By entering the play in full development mode, Devon expects to substantially grow production in the near term while also generating significant free cash-flow. The acquired assets are expected to grow at a compound annual growth rate of 25 percent over the next several years, reaching a peak production rate of approximately 140,000 BOE per day. The development drilling program is immediately self-funding and expected to generate annual free cash-flow of approximately $800 million beginning in 2015 and growing thereafter.