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Movement in shale plays as Devon Energy announced the sale of non-core Dellaware basin assets after the market close Tuesday to Carrizo Oil and Gas, $CRZO will pay $DVN $215 million and plans to fund the purchase price with net proceeds from an equity offering.

CRZO Delaware acerage

 

Devon announced they entered into a deal with Carrizo Oil & Gas to divest non-core Delaware Basin acreage for $215 million. Devon has been aggressively divesting assets for a number of years.

The deal includes 2.5 Mboe/d in production and 9,600 net acres in Ward and Reeves County, Texas. The deal is expected to close by the fourth quarter of 2018. Carrizo cited that the asset holds over 100 net potential de-risked locations across the Wolfcamp A and B, with upside from other zones. CRZO cited a high degree of operational control with more than 90% of net acreage operated

  • Minimal near-term drilling obligations as 94% of the acreage is held by production
  • Low average royalty of approximately 20% Net production of approximately 2,500 Boe/d (60% oil)
  • More than 100 net potential de-risked drilling locations identified across the Wolfcamp A and B based on 7,000-ft. laterals, with significant upside potential from additional zones, further delineation, and future downspacing Includes salt-water disposal wells that can be integrated into the Company’s system
  • Significant opportunities to generate efficiencies from increased scale, extension of lateral lengths, and integration of infrastructure

The deal boosts Carrizo's position in the play to 46,000 net acres. For Devon in the Delaware, new well activity had been headlined by two Boundary Raider wells that achieved a combined 24-hour initial production rate of ~24K boe/day (80%) last year, which $DVN says are the highest-rate wells brought online in the history of the Delaware Basin.

S.P. “Chip” Johnson, IV, Carrizo’s President and CEO, commented on the acquisition, “This acquisition is an excellent fit with our existing Phantom-area acreage and meaningfully increases our scale in the area. Upon completion of the transaction, we will hold approximately 26,300 net acres in our Phantom area and 46,000 net acres in the Delaware Basin. The acquisition materially increases our inventory of de-risked drilling locations in the area as well as offers significant upside potential from delineating the entire position and testing additional zones. The acreage also has a high degree of operational control and minimal near-term drilling obligations. As a result, we expect to seamlessly integrate these assets into our existing development plan for the area, which currently assumes a ramp-up in activity in the second half of 2019 as Permian pipeline takeaway is forecast to increase. Over time, we see the potential to achieve meaningful efficiencies through optimizing future large-scale pad development, drilling longer-lateral wells, and integrating the existing infrastructure within our system.”

Carrizo Oil & Gas announced better than expected second quarter earnings before the market open last week. However the stock fell over 10% on concerns over Delaware and other Texas basin bottlenecks.  $CRZO said multiple Delaware Basin Wolfcamp A wells achieved crude oil production rates of more than 1,000 Bbls/d on restricted chokes

Carrizo Dellaware Q2

The company also signed a deal with a major crude purchaser that provides 100% flow assurance for Delaware Basin crude oil production through mid-2020 with no minimum volume commitments Interestingly in light of this dea; Carrizo said they were shifting capital to the Eagle Ford Shale from the Delaware Basin in order to capitalize on the superior margins and rates of return being generated

CRZO also forecast to the high-end of guidance range despite the impact of a non-operated divestiture in the Delaware Basin and expected acceleration of Brown Trust payout (650-700 Boe/d combined negative impact for FY 2018). Exposure of Eagle Ford production to premium LLS market expected to result in continued strong oil price realizations Lowering FY unit LOE guidance to $7.15-$7.50 from $7.50-$8.25 Capex guidance range increased from $750-$800 million to account for DUC build in the Eagle Ford Shale to prepare for 2019 activity

Last year Devon sold Eagle Ford Assets to Penn Virginia for $205 Million as part of its $1 billion divestiture plan, first announced in May, 2017.

Devon Energy Operations Devon Energy Operations

Devon's divestment program has now reached $4.4 billion in sales, with remaining packages to be sold in the Midland Basin, Rockies and Barnett Shale.

About Devon Energy

Devon Energy Corporation is a leading independent oil and natural gas exploration and production company. Devon's operations are focused onshore in the United States and Canada. Devon has more than doubled its onshore North American oil production since 2011. Today the company produces approximately 250,000 barrels a day and has a deep inventory of development opportunities to deliver future oil growth. Devon also produces about 1.3 billion cubic feet of natural gas a day and about 100,000 barrels of natural gas liquids per day.

Headquartered in Oklahoma City, Devon is a Fortune 500 company and is included in the S&P 500 Index. Its common shares trade on the New York Stock Exchange under the ticker symbol DVN.

About Carrizo Oil and Gas

Carrizo oil & gas, inc. is a houston-based energy company actively engaged in the exploration, development, and production of oil and gas from resource plays located in the united states. Our current operations are principally focused in proven, producing oil and gas shales in the Eagle Ford Shale in South Texas and the Delaware Basin in West Texas.

Source: Devon, Carrizo

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