Devon reportedly considering Eagle Ford, Powder River asset sale

Devon Energy is reportedly exploring a sale of its assets in the Eagle Ford shale in Texas and the Powder River Basin in Wyoming. Citing sources familiar with the matter, Bloomberg reported last week that a sale of both assets could fetch more than $4bn.

One of the sources went on to say that Devon was aiming to announce a strategic review of the assets when it reports its second-quarter earnings in early August. However, the sources cautioned that no final decision had been made, that the timing could change or that Devon could opt to retain the assets.

Such an asset sale would not come as a surprise, though, given that Devon is in the process of streamlining its portfolio after it closed its $58bn merger with Coterra Energy in May. Comments made by company executives both before and after the merger indicate that Devon is seeking to concentrate its portfolio around its position in the Permian Basin. Indeed, also in May, Devon spent around $2.6bn on federal leases in the Permian in an onshore lease sale held by the US Department of the Interior (DoI), representing a further step in its efforts to grow its footprint in the basin.

A move to sell non-core assets in other shale regions would also be in line with a broader shale industry trend. There has been a major wave of consolidation in recent years, including companies acquiring other shale players that have operations in multiple regions including regions the buyer may consider non-core. The company being acquired can nonetheless still represent an attractive opportunity to build scale, and the buyer subsequently proceeds to offload non-core assets in a bid to pay down debt and optimise its newly expanded portfolio.

“Acquiring Coterra further diversifies a fairly diffuse asset base,” a Bloomberg Intelligence analyst, Vince Piazza, wrote in a report days prior to the Bloomberg report on Devon exploring an asset sale. “Though Permian concentration will grow, asset sales will likely be needed,” he added.

Bloomberg noted that Devon has also come under pressure from investors including Kimmeridge Energy Management and Capital Investment Management to expedite its asset sale programme. And indeed, Devon’s CEO, Clay Gaspar, told investors in New York last month that the company’s push to evaluate its portfolio would be a months-long rather than a years-long exercise.

Given such comments, it seems likely that Devon could announce an asset sale or steps towards one soon.