Devon Agrees to Sell Pipeline Stake to Wolf for $1.1 Billionby
Company completes asset sales raising total of $3.2 billion
Third purchase in just over a month for CPPIB-backed firms
Devon Energy Corp. agreed to sell its 50 percent stake in Canada’s Access Pipeline to Canada Pension Plan Investment Board-backed Wolf Midstream Inc. for C$1.4 billion ($1.1 billion).
Devon may also get an additional C$150 million from the sale if a planned thermal-oil project on Devon’s Pike lease in Alberta goes ahead, the companies said in a statement Thursday.
“With this highly accretive sale of Access, Devon’s divestiture program is now complete with proceeds totaling $3.2 billion,” said Dave Hager, Devon’s chief executive officer.
Devon said it would use the proceeds to strengthen its balance sheet and invest in its capital programs. Shares in Oklahoma City-based in Devon slipped 0.8 percent to $38.95 in New York as of 10:25 a.m.
The shale driller was seeking to sell $2 billion to $3 billion in assets this year to reduce debt, marketing assets in the Midland Basin, East Texas, Granite Wash and Mississippian shale plays.
Devon co-founder and Chairman J. Larry Nichols was among a handful of pioneers who pushed new drilling techniques that triggered the shale revolution and an explosion in U.S. energy production over the last decade.
More recently, the producer has struggled along with other drillers to withstand the global plunge in oil and gas prices. Devon slashed its capital budget and quarterly dividend by 75 percent apiece earlier this year and announced plans to let go of a quarter of its workforce.
The company owns rights to drill 5.5 million acres of oil and gas-laden rocks in Texas, Oklahoma and the Rockies, as well as oil-sands deposits in Canada.
The purchase is the third in a little over a month for Canada Pension-backed companies in Western Canada, and the first since Wolf was formed last September. Oil and gas companies are seeking to shore up balance sheets amid a sustained price rout across commodities.
"Access is an attractive foundational asset for Wolf that provides us with immediate scale in the region," said Gord Salahor, Wolf chief executive, said in the statement.
The transaction is expected to close in the third quarter. It will be funded through an C$825 million investment from Canada Pension and third-party financing.
Last week, Seven Generations Energy Ltd., in which Canada Pension has a 16 percent stake, agreed to buy Alberta shale assets from Paramount Resources Ltd. for about C$1.3 billion.
That purchase followed on the heels of Canada Pension-backed Teine Energy Ltd. agreeing to buy oil-producing properties from Penn West Petroleum Ltd. for C$975 million.
"Over the past six months, we have said that we believe there are opportunities to invest in this sector, and these investments reflect that," Mei Mavin, a representative for Canada Pension, said in an e-mail.
Bennett Jones LLP acted as legal adviser to Devon. Peters & Co. acted as financial adviser for Wolf while Norton Rose Fulbright Canada LLP provided legal advise.