Oklahoma City-based Devon Energy has taken another step in its $1 billion divestiture program with the sale of nearly 20,000 of holdings the Eagle Ford play of south Texas.
The 19,600 acres was sold to Penn Virginia Corp. for $205 million cash in a deal targeted to be closed by Sept. 30. Penn Virginia officials said they expect the purchase price to eventually be adjusted to nearly $190 million.
The sale by Devon is yet another step as the company seeks $1 billion in divestiture of assets. Presently, it has sold off an estimated $340 million in holdings.
The assets are in Lavaca County, Texas and contiguous to Penn Virginia’s core operations. The purchase should increase Penn Virginia’s net acreage by 35 percent and net production by nearly 30 percent or approximately 3,000 barrels of oil equivalent a day.
Penn Virginia exited bankruptcy last year and moved its headquarters to Houston.
The purchase also includes an infield gathering and compression system. Penn Virginia’s net drilling inventory will be increased by about 23 percent as a result of the purchase.
Penn Virginia financed the deal with a new $150 million of committed debt financing and borrowings under its credit facility.
“Our operations team knows this area extremely well as the Devon acreage is contiguous to our existing acreage position,” said John Brooks, interim principal executive officer and COO. “We will utilize our technical capabilities to optimize production and reduce operating and administrative costs per BOE on the acquired assets, while significantly increasing the size and scale of our company. In summary, we are acquiring high quality properties at an attractive price that will provide Penn Virginia many years of drilling inventory with enhanced economics even in today’s commodity price environment.”