Devon Energy’s announced a more than $3 billion sale of its ownership interests in EnLink Midstream Partners, LP and EnLink Midstream LLC to an affiliate of Global Infrastructure Partners.
The price actually totaled $3.125 billion and as part of the sale agreement, Devon’s board of directors increased the size of the company’s share-repurchase authorization to $4 billion. The share-repurchase plan represents nearly 20 percent of outstanding Devon stock.
Company leaders say the EnLink sale will cut Devon’s consolidated debt by 40 percent and the company’s G and A and interest costs will decline by nearly $300 million a year.
“The sale of our EnLink interests represents a significant step forward in achieving our 2020 Vision to further simplify our asset portfolio and return excess cash to shareholders,” said Dave Hager, president and CEO. “This highly accretive transaction provides a strategic exit from EnLink at a value of 12 times cash flow, a substantial premium to Devon’s current trading multiple.”
He said proceeds from the EnLink sale and proceeds from non-core assets previously sold will exceed the company’s $5 billion divestiture target.
“Looking ahead, we will continue to build upon our strong relationship with EnLink and GIP,” Hager said. “EnLink remains a preferred partner for us in the midstream space, and we will continue to pursue mutually beneficial ways to grow our respective businesses across North America’s most prolific growth basins.”
The move to increase the company’s share-repurchase program to $4 billion will extend through Dec. 31, 2019 and is conditioned upon the closing of the EnLink transaction which is expected in July 2018. At the end of April, Devon had completed $204 million of repurchases under the program totaling 6.2 million shares.
At the closing of the sale, the financial results of EnLink Midstream will no longer be consolidated with Devon’s upstream business. Devon’s ownership interests in EnLink Midstream includes 115 million units in the general partner and 95 million units in the master limited partnership. Devon’s interests in EnLink generated $265 million of cash over the past year, valuing the transaction at nearly 12 times cash flow.
Goldman Sachs & Co. LLC acted as the financial advisor to Devon on the transaction. J.P. Morgan Securities LLC provided a fairness opinion to Devon’s board of directors. Vinson & Elkins L.L.P. acted as legal advisor to Devon.
