Devon Energy To Acquire Bakken Driller Grayson Mill In $5B Deal

Independent oil & gas company Devon Energy (NYSE:DVN) has announced plans to acquire Grayson Mill Energy's Williston Basin business in a cash and stock deal valued at ~$5B, consisting of $3.25B of cash and $1.75B of stock. According to the Oklahoma-based shale producer, the purchase will add 307K net acres (70% working interest) to its portfolio, significantly expanding its position in the Williston Basin. Production from the acquired properties is expected to be maintained at ~100K boe/day (55% oil) in 2025.

With enhanced scale in the basin, Devon expects to realize up to $50M in average annual cash flow savings from marketing synergies and operating efficiencies. Devon currently produces 375K bbl of crude per day with total production clocking in at an average 765K boe/day across its portfolio of assets. Devon has also announced plans to boost its stock buyback authorization by 67% to $5B thanks to the accretive nature of the transaction to free cash flow.

"The acquisition of Grayson Mill is an excellent strategic fit for Devon that allows us to efficiently expand our oil production and operating scale while capturing a meaningful runway of highly economic drilling inventory," Devon President and CEO Rick Muncrief said.

According to Reuters, Devon Energy has failed in three acquisition attempts over the past 12 months because higher drilling costs and production issues made its stock less attractive to acquisition targets. Devon missed out on the energy sector's M&A boom by losing to ConocoPhillips (NYSE:COP) in buying Marathon Oil (NYSE:MRO), Occidental Petroleum (NYSE:OXY) in acquiring CrownRock, and Chord Energy (NASDAQ:CHRD) in obtaining Enerplus. Acquisition targets have been skeptical about the value of Devon's stock, which has lagged the S&P 500 Energy index by 16 percentage points in the last 12 months. Thankfully, analysts have pointed out that Devon could still take another shot at logical targets including Permian Resources (NYSE:PR), Matador Resources (NYSE:MTDR) and privately-held Mewbourne Oil, all of which would bolster its Delaware Basin position.

By Alex Kimani for Oilprice.com

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