(Bloomberg) -- Devon Energy Corp. agreed to acquire the Williston Basin business of EnCap Investments LP’s Grayson Mill Energy for $5 billion as consolidation continues in the US oil patch.
Devon will pay $3.25 billion in cash and $1.75 billion in stock for the assets in the Bakken region of North Dakota and Montana, the company said in a statement Monday. Devon plans to finance the first portion with cash on hand and debt. The deal is expected to close by the end of the third quarter.
The move will significantly expand Devon’s operations in the Williston, vaulting it from the basin’s 10th largest producer to the fourth, according to the research firm Enverus. It will give Oklahoma City-based Devon access to an additional 500 drilling locations that the company expects will produce about 100,000 barrels of oil per day in 2025.
The acquisition of assets across 307,000 acres (124,000 hectares) is the latest in the US oil patch as shale basins age and companies push to line up future drilling sites so they can keep funding dividends and share buybacks.
Grayson Mill was one of the largest remaining private US oil producers that was reasonably likely to come up for sale, Enverus analyst Andrew Dittmar said in a note.
“While Devon still had a substantial runway of remaining drilling opportunities, pressure may have been mounting on the company to strike a deal to keep pace with peers that had been rapidly rolling up remaining opportunities,” he said.
Devon expects the Grayson Mill deal to boost its earnings enough that the board increased its share repurchase authorization by 67%, to $5 billion through mid-year 2026, according to the statement. Devon plans to update its 2024 guidance after the deal closes.
The company’s shares fell as much as 3.2% Monday.
Citigroup was Devon’s financial adviser, and Kirkland & Ellis LLP was its legal adviser.
--With assistance from Joe Ryan.
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