Devon Energy Enhances Permian Inventory in Federal Lease Sale
Devon Energy announced the acquisition of another 16,000 acres in the Delaware Basin of New Mexico in a $2.6 billion deal.
The company, now headquartered in Houston, Texas, paid $161,500 per net acre for a total of 16,300 net undeveloped acres in the core of the Delaware Basin located in Lea and Eddy Counties in the southeast part of the state. The acquisition was through the Bureau of Land Management Oil and Gas Lease Sale and bolsters the premier Delaware Basin positions in the industry, extends inventory life and is accretive to net asset value per share, according to the company.
Devon also was the biggest buyer in the BLM’s lease sale and accounted for the majority of the record-setting $4 billion auction for federal lands in New Mexico. Devon paid the highest-ever price for a single parcel ($405.8M for 1,280 acres) and the highest-ever price per acre ($357,129) at a BLM sale, according to Reuters.
KEY HIGHLIGHTS
• Acquisition adds approximately 400 net locations normalized to 2-mile laterals, with expected strong well economics and low breakevens supported by:
• High Net Revenue Interest: Federal leases carry an 87.5% net revenue interest (“NRI”), with 10-year terms across all depths, more favorable than NRIs typical of state and fee leases in the region.
• Contiguous Acreage Position: Provides the ability to drill longer laterals and lower costs through co-development and multi-well pad development.
• Top-Tier Productivity: Highly productive wells across multiple zones expected to compete for near-term capital.
• Leveraging Competitive Cost Structure: Acreage is directly adjacent to Devon’s existing Delaware Basin position, providing the ability to leverage existing facilities and infrastructure. Devon’s top-tier drilling and completion cost performance across its Delaware Basin operations provides a significant underwriting advantage in developing these assets.
• Transaction value of $2.6 billion ($161,500 per net acre or $6.5 million per location) is expected to be funded with cash on hand while maintaining our strong credit profile. Devon remains fully committed to a disciplined cash-return framework, including its recently announced $8 billion share repurchase program.
CEO COMMENTARY
“This BLM lease sale presented a rare and compelling opportunity to add high-quality, contiguous federal acreage at scale in the core of the Delaware Basin,” said Clay Gaspar, Devon’s President and Chief Executive Officer. “Each tract was evaluated on rock quality, midstream connectivity, strategic fit and per-share value accretion for our owners. The favorable federal lease terms, including the lower royalty burden, multi-pay potential and the ability to develop with longer laterals on multi-well pads, are immediately accretive to our top-tier inventory. This acquisition is consistent with our successful ground game track record and strengthens our leading Delaware Basin position.”
“The success we achieved in this auction is a testament to the alignment of our Board and the effectiveness of our team, even as we continue to accelerate through the integration of a major merger completed just two weeks ago. Our combined understanding of the basin following the Coterra merger only reinforced our conviction in the quality and depth of this inventory and our confidence in moving decisively to capture these accretive highquality opportunities.”
ABOUT DEVON ENERGY
Devon Energy is a leading oil and gas producer in the U.S. with a premier multi-basin portfolio with assets in the Anadarko Basin, Eagle Ford, Marcellus Shale, Powder River Basin, Williston Basin, anchored by a world-class position in the Delaware Basin. Devon’s disciplined cash-return business model is designed to achieve strong returns, generate resilient free cash flow and return capital to shareholders, while focusing on safe and
sustainable operations.
