Devon to exit Eagle Ford with $4.2bn sale to Crescent

Devon Energy (NYSE: DVN) announced last week that it had struck a deal to sell its Eagle Ford assets to Crescent Energy, which is backed by KKR & Co., for around $4.2bn in cash.

The assets being sold consist of around 90,000 net acres (364 square km) spanning Texas’ Karnes, DeWitt and Gonzales counties. Devon said the assets represent roughly 4% of its total production.

In a separate announcement, Crescent said the assets include around 68,000 barrels of oil equivalent per day (boepd) of net production and more than 600 Tier 1 normalised to 10,000 feet (3,048 metres). Crescent added that it had long-standing minerals ownership across the assets being acquired, as well as nearby operations and deep technical knowledge. It said that these factors all provided it with “differentiated insight and conviction in the assets”.

For Devon, the sale comes amid an ongoing portfolio review in the wake of the company’s $58bn merger with Coterra Energy, which closed in May this year. Since then, Devon has been reviewing its portfolio as it seeks to sharpen its focus on the Permian Basin while offloading non-core assets. Bloomberg had reported earlier on the day that the Eagle Ford sale was announced, October 8, that Devon and Crescent were in advanced talks, so the announcement came as no great surprise.

“This sale is a direct outcome of our ongoing portfolio review, and it sharpens our focus on the highest-return, longest-duration assets,” stated Devon’s president and CEO, Clay Gaspar. “Over the past several years, we have leveraged technology to lower costs and increase productivity while coring up our Eagle Ford acreage footprint, and the attractive price agreed to reflects both the quality of the assets and that work.”

Gaspar went on the describe Devon’s Eagle Ford assets as relatively mature and said selling them into a strong commodity price environment would improve the company’s capital efficiency, while also allowing it to accelerate share buybacks and strengthen its balance sheet.

For Crescent, the deal will consolidate its position among the Eagle Ford’s largest producers, energy analytics firm Novi Labs commented. Crescent itself said it would be applying its “buy assets and make them better” operating playbook to the acquisition. The company added that it had identified around $140mn in annual synergies across drilling and completions (D&C), lease operating expenses (LOE) and marketing.

However, Reuters cited a Siebert Williams analyst, Gabriele Sorbara, as saying the deal's size could weigh on Crescent by creating ⁠a near-term funding overhang.

"That said, the acquisition appears accretive to Crescent, with successful integration, synergy realisation and deleveraging potentially providing meaningful upside, consistent with its track record of value creation through prior acquisitions,” the news service quoted Sorbara as saying.