By Seher Dareen
(Reuters) – Devon Energy said on Monday it had entered into a deal to acquire private equity firm EnCap-owned Grayson Mill Energy’s Williston basin business in a cash-and-stock deal worth $5 billion, as it aims to cash in on high stock valuations to grow acreage.
The deal value includes $3.25 billion in cash and $1.75 billion in stock, and will enhance the “multi-basin business” Devon has, company executives said on the conference call.
Shares of the company were 1.7% lower in early morning trading amidst a lower crude price environment.
A consolidation in the U.S. energy sector that triggered $250 billion worth of deals in 2023 has bled into this year, with companies seeking opportunities to deploy their capital and expand their reserves.
This has created a favorable environment for private equity firms like EnCap to cash out on assets. In June, the firm sold some shale assets of XCL Resources for about $2 billion.
Reuters reported in January that the firm planned to sell Grayson Mill, a major Bakken-focused energy producer in North Dakota, Montana, and the Powder River Basin in Wyoming.
The deal, expected to close by the end of the third quarter, will add up to 10 years of inventory life with 500 additional wells, primarily in the Bakken, contributing 307,000 net acres to Devon’s Williston Basin position.
The energy producer expects its output to grow to 765,000 barrels of oil equivalent per day (boepd) from 664,000 boepd.
While the deal cost appears to be on the higher side, the three-rig Bakken plan and midstream addition should help incremental shareholder returns primarily through stock buybacks, said Neal Dingmann, an analyst at Truist Securities.
The company’s board of directors also expects to expand its share repurchase by 67% to $5 billion through mid-year 2026, while the acquisition is expected to add to the company’s dividend payout starting 2025.
(Reporting by Seher Dareen in Bengaluru; Editing by Anil D’Silva and Tasim Zahid)
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