Devon Business Practices

[Pete]

Full article released internally:

Devon is delivering a dramatic boost to its oil portfolio, announcing today a $6 billion cash acquisition for assets in the heart of the Eagle Ford, one of North America’s most prolific oil plays. The move makes Devon one of the top light oil producers among North American independents.

Devon will acquire GeoSouthern Energy’s interest in the play, which includes:
Current production of approximately 53,000 barrels of oil equivalent (BOE) per day, 56 percent of which is light, sweet oil
82,000 net acres
1,200 undrilled locations
The risked recoverable resource is estimated at 400 million barrels of oil equivalent. The transaction is expected to be immediately accretive to almost all financial metrics, including earnings per share and cash flow per share, adjusted for debt.

“This is a world-class asset in the heart of the Eagle Ford,” said John Richels, president and CEO. “It is derisked and ready for full-scale development.”

The acquired acreage is focused exclusively in the Eagle Ford with the acreage primarily located in DeWitt and Lavaca counties in Texas. The acreage is largely contiguous, with most of the position held by production. The acreage position is located in the very best part of the play, as evidenced by the highest average initial production rates in the entire Eagle Ford play.

The majority of the 82,000 net acres 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 generating significant free cash flow.

The acquired assets are expected to grow at a compound annual growth rate of approximately 25 percent over the next several years, reaching a peak of 140,000 BOE per day. The development drilling program is immediately self-funding and expected to generate annual free cash flow in excess of $800 million in 2015 and to grow thereafter.

The deal is expected to close in the first quarter of 2014. Once it closes, most of GeoSouthern’s Eagle Ford employees will become Devon employees, working in the Woodlands, Texas, office.

The New Devon

This transaction is one part of Devon’s strategy to bolster its asset portfolio with high-margin properties and bring greater focus to its capital, both human and financial. This increased focus on core assets will deliver significant light oil production growth in 2014 and beyond.

“We are focusing on optimizing our key development areas and pursuing our emerging plays,” said Dave Hager, chief operating officer. “This also means we will be monetizing non-core assets, which generate low margins, lack scale and are not capable of contributing significant growth today or in the future.”

These non-core assets include Devon’s entire Canadian conventional business and certain other assets in the United States.

“These are important steps to improve our portfolio, but great assets alone will not deliver great results,” said Hager. “It takes exceptional execution and thoughtful alignment with our company’s value chain. I am very optimistic that with the bold steps we are taking to improve our portfolio, combined with superior execution by our terrific team of employees, we will achieve our vision to be the premier independent oil and natural gas company in North America.”

I've bolded a key part of this press release because it has gone almost completely unnoticed and in fact could be a very important development for Oklahoma City.

I've been told that:
1) The GeoSouthern acquisition will not mean a significant number of new jobs in OKC because most their wells are non-operated (drilled and operated by a third part) and that arrangement is expected to continue. However, Devon will operate some new wells in that area and thus there will be an OKC-based team for that purpose.
2) They are selling off all their Canadian assets then effectively shutting down their Canadian office (Calgary)
3) There are over 800 Devon full-time employees in Calgary plus over 500 in the field
4) A good chunk (up to 50%) of all Devon's IT personnel are in Calgary
5) Many of these non-field positions may be moved to Oklahoma City

[PhiAlpha]

I've bolded a key part of this press release because it has gone almost completely unnoticed and in fact could be a very important development for Oklahoma City.

I've been told that:
1) The GeoSouthern acquisition will not mean a significant number of new jobs in OKC because most their wells are non-operated (drilled and operated by a third part) and that arrangement is expected to continue. However, Devon will operate some new wells in that area and thus there will be an OKC-based team for that purpose.
2) They are selling off all their Canadian assets then effectively shutting down their Canadian office (Calgary)
3) There are over 800 Devon full-time employees in Calgary plus over 500 in the field
4) A good chunk (up to 50%) of all Devon's IT personnel are in Calgary
5) Many of these non-field positions may be moved to Oklahoma City

I've heard they plan to sell off all of their "conventional" Canadian assets and will be shifting/downsizing the staff associated with those. Devon has a decent sized position in Canadian unconventional assets including mainly the Alberta oil Sands (think the Thunder commercial that ran over and over again for 3 years about drilling a horizontal well and then drilling a steam horizontal well on top of it to loosen up the heavy oil and allow it to seep into the original well). I've seen no indication that they plan to sell those assets and close down the entire Calgary office. Not to say that a complete shutdown is not at all possible, but that's not what that article indicates or what I've heard from people I know there.

[lasomeday]

I've bolded a key part of this press release because it has gone almost completely unnoticed and in fact could be a very important development for Oklahoma City.

I've been told that:
1) The GeoSouthern acquisition will not mean a significant number of new jobs in OKC because most their wells are non-operated (drilled and operated by a third part) and that arrangement is expected to continue. However, Devon will operate some new wells in that area and thus there will be an OKC-based team for that purpose.
2) They are selling off all their Canadian assets then effectively shutting down their Canadian office (Calgary)
3) There are over 800 Devon full-time employees in Calgary plus over 500 in the field
4) A good chunk (up to 50%) of all Devon's IT personnel are in Calgary
5) Many of these non-field positions may be moved to Oklahoma City

I don't know who your source is, but they don't know what they are talking about.... The GeoSouthern wells will be drilled by BHP and then operated by Devon. They are not selling all of their Canadian assets and definitely not closing their Canadian office. They are not moving anybody from Calgary to OKC. PhiAlpha is spot on.