NEW YORK, N.Y. - Devon Energy Corp. is buying oil-producing assets and other property in the Eagle Ford shale formation in Texas from GeoSouthern Energy for $6 billion.
Devon said Wednesday that the assets include current production of 53,000 barrels of oil equivalent per day and 82,000 net acres with at least 1,200 undrilled locations.
The acquisition includes acreage in DeWitt and Lavaca counties in Texas. The assets are expected to reach a peak production rate of about 140,000 BOE per day.
Devon was a pioneer in combining the use of horizontal drilling with hydraulic fracturing to free up natural gas from shale rock formations. That led to a boom in natural gas production last decade, but the increased drilling eventually created a glut that depressed natural gas prices. Devon continued to concentrate its operations in natural gas, even as other companies refocused on making profits from drilling for oil in states such as Texas, Oklahoma and North Dakota.
Analysts say the GeoSouthern deal will give Devon a better balance between oil and natural gas.
Canaccord Genuity analyst Robert Christensen said oil currently accounts for 12 per cent of Devon's total volume. "This deal would likely increase Devon's oil production by a significant amount, as GeoSouthern is the 4th largest oil producer in the Eagle Ford," he wrote in a note to clients.
GeoSouthern will continue to run its other assets in the Texas Gulf Coast region and other areas. Its corporate partner, The Blackstone Group, will exit its stake in the company as a result of the Devon transaction.
Devon plans to fund the deal with available cash and borrowings. The deal is expected to close in early 2014.
Devon's stock gained 69 cents, or 1.1 per cent, to $63.46 in midday trading Wednesday. The shares jumped 5 per cent Tuesday on reports that Devon was close to a deal with GeoSouthern.