Devon Energy Corp. is seeking a joint-venture partner for five exploratory projects covering 1.2 million acres in the U.S., including the oil-bearing Niobrara and Utica formations, Chief Executive Officer John Richels said.
Potential partners are reviewing data on the Mississippian oil deposit in Oklahoma, oil and natural-gas shale formations in Michigan and Louisiana, the Utica Shale in Ohio and the Niobrara deposit in Wyoming and Colorado, Richels said today in an investor conference call. Devon is still buying leases in those areas, he said.
“Given the scale, this could interest a major oil company,” Mark Gilman, a New York-based analyst for Benchmark Co., said in an interview. “This is when you get in: early.”
Devon may raise $1.8 billion from selling a one-third stake in the joint venture, based on comparable deals in those areas, Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, said today in a telephone interview.
An international oil company seeking a bigger stake in so- called uncoventional U.S. oil plays may be the most likely buyer, Hanold said. India’s Reliance Industries Ltd. and Japan’s Mitsui & Co. are among those, he said.
Chevron Corp., the second-largest U.S. oil company, is a potential buyer, along with New York-based Hess Corp. and Murphy Oil Co., which is selling its refineries to focus on production, said Gilman, who rates Devon shares “buy” and owns none.
Devon, which sold $10 billion of overseas and offshore assets last year, is “clearly not pursuing this because we need the money,” Richels said. “We see many advantages to bringing in an exploration partner.”
The company, based in Oklahoma City, today reported $6.8 billion of cash and short-term investments as of June 30, after $800 million of stock buybacks and shareholder payouts in the third quarter.
Unlike rivals including Chesapeake Energy Corp., which sold joint-venture stakes in individual deposits, Devon wants one partner for all five regions, and a company that’s willing to link up for as long as two decades, Richels said.
Devon has drilled a well in each area and plans 40 new wells in the next few months, he said.
Devon rose 4.9 percent to close at $65.46 at 4 p.m. in New York. The shares have fallen 16 percent this year.
SSN Price at posting:
11.5¢ Sentiment: Hold Disclosure: Held
