Hess also jumps on buyback wagon

Devon Energy (ticker: DVN) announced major moves today, selling assets to fund a new share buyback program.

Devon plans to sell its southern Barnett assets for a total of $553 million. Net production from these properties, which are located in Johnson County, Texas, average 200 MMcfe/d. Based on the closing price, Devon will receive about $2,765 per flowing Mcfe/d for the sale, in line with other recent gas deals like PDCE’s Ohio sale and WildHorse’s North Louisiana sale.

Sale price represents 5.5x yearly cash flow

Devon estimates field-level cash flow from these properties, which excludes overhead costs, will be about $100 million in 2018, meaning the company is getting 5.5x yearly cash flow for its assets. Devon itself is currently valued at about 4.2x yearly cash flow, so this sale represents a good deal for the company.

Retained Barnett properties could be worth $2 billion

Devon still holds a sizeable Barnett position, located in Denton, Wise and Tarrant Counties. These assets have a current production of about 680 MMcfe/d, so the company’s retained position is more than three times the size of the sold assets. If the company receives consistent production valuation, the remaining Barnett properties are worth nearly $2 billion.

According to PLS’s M&A Database, the buyer of these assets is Fleur de Lis Energy, a private company backed by Porter Trimble. On its website, Fleur de Lis reports it has about 40.8 MBOEPD of production, so this acquisition would be a major expansion for the company.

Devon Sells Southern Barnett, Announces Share Buyback

Source: Fleur de Lis Energy

$1 billion in share buybacks, $1 billion in debt repurchases

Devon will immediately put the funds from this sale to use, as it made several announcements in an effort to return cash to shareholders.

Devon authorized a $1 billion share repurchase program over the next year, meaning the company is following the recent trend among large-cap E&Ps. At the yesterday’s closing share price, this program will cover about 6% of the company’s current stock. The company is also increasing its dividend by 33%, from $0.06 per share to $0.08 per share. Devon also announced a tender offer for up to $1 billion of its debt with maturities between 2022 and 2041. This offer will expire on April 3.

Hess also announced $1 billion in buybacks

Share buybacks have become very popular in recent months, as investors push companies to take advantage of rising oil prices by returning cash to shareholders. Buybacks are so popular, in fact, that Devon was not the only major E&P to announce a repurchase program today. Hess (ticker: HES) announced a $1 billion buyback program for this year, in addition to the company’s $500 million repurchase program announced in late 2017.

Devon President and CEO Dave Hager commented on the moves, saying “Combined with other recent asset sales, divestiture proceeds associated with our 2020 Vision have now reached $1.0 billion. Today’s announcement to increase the cash dividend and initiate a share-repurchase program is consistent with our strategic plan and demonstrates our firm commitment to enhance shareholder value. With our disciplined multi-year plan, we expect to generate substantial amounts of excess cash flow at prices above our base planning scenario of $50 WTI pricing and through additional portfolio simplification efforts. We are confident in our ability to execute on these initiatives and, as market conditions permit, we will continue to pursue opportunities to further increase cash returns to our shareholders.”


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