Devon Energy, the largest producer in North Texas’ Barnett Shale, said today it is seeking a joint venture partner to develop shale oil and natural gas formations in several states. In a conference call with financial analysts following its third-quarter earnings release, CEO John Richels said the Oklahoma City-based firm would prefer one partner to participate in the development of 1.2 million acres in leases it holds in Oklahoma, Michigan, Louisiana, the Utica Shale in Ohio and the Niobrara deposit in Wyoming and Colorado. He said Devon has a well in each area and plans 40 new wells soon.
It’s possible Devon could raise $1.8 billion selling just a one-third stake in those properties, based on comparable deals, Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, told Bloomberg News today.The company is hardly cash-poor. It reported $6.8 billion in cash and equivalents as of Sept. 30, the product of big overseas asset sales last year.
Analyst Phil Adams at Gimme Credit, an independent debt researcher, said Devon’s rich cash position could help it negotiate better terms if it strikes a deal. He judged the move a positive, allowing the company to reduce risk and get a faster return of cash spent acquiring the acreage.
-- Jim Fuquay