Early this year Devon Energy signed a JV agreement with the Chinese petrochemical company, Sinopec, in a $2.5 billion deal that gives Sinopec a one-third stake in 5 U.S. emerging plays. These include the Mississippi Lime, Niobrara, Utica, Tuscaloosa Marine, and Michigan plays. The latest JV agreement involves Japan’s Sumitomo Corp. in a $1.4 billion deal. The agreement entitles Sumitomo to a 30% stake in 650,000 net acres in the Permian Basin prospective to the Cline and Midland-Wolfcamp shale. Sumitomo has agreed to invest in the non-operated interests of the project, including leases, existing wells, and facilities. Drilling activities are expected to last over a 15 year period, while the entire project life is estimated to be more than 30 years. This will enhance the company’s capital efficiency, future returns and overall financial strength, according to Devon Energy CEO, John Richels. The transaction is expected to close in late September when Sumitomo agreed to pay $340 million in cash and another $1.025 billion in a drilling carry, which would cover 70% of Devon’s capital requirements. This is not the first U.S. JV in which Sumitomo has been involved. In 2009, Sumitomo was the first Asian company to participate in shale gas development in the Barnett. The next year, Sumitomo also moved into the Marcellus, striking up a JV there. So naturally, the next big move was to attain some tight oil assets, and with Devon’s high quality portfolio it makes sense.
Using Drilling Info, I’ve put together a snapshot of Devon’s Midland Basin acreage position, as well as their producing Wolfcamp well inventory.
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