Devon Energy (DVN) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition expands oil-weighted production and secures a premier leasehold in the Williston Basin, aligning with the strategy to grow in top U.S. shale plays and positioning as a leading U.S. oil producer with ~375,000 barrels per day pro forma production.

• Triples in-basin production to 150,000 Boe per day, with oil comprising nearly 60% of the mix, and adds 307,000 net acres and 500 gross drilling locations.

• Expands inventory runway in the Williston to about 10 years at current development pace, with 500 new well locations and 300 refrac candidates.

• Enhances multi-basin business, supplementing Williston operations without reducing Delaware Basin activity.

• Both companies have a track record of industry-leading well productivity.

Financial terms and conditions

• Transaction valued at $5 billion, funded 65% in cash and 35% in stock (37 million shares), with cash from on hand and debt.

• Deal expected to close by end of Q3 2024, effective as of June 1, 2024.

• Delivers double-digit accretion to Free Cash Flow, immediately benefiting shareholders via higher cash distributions and is accretive to EPS, CFPS, FCF per share, and NAV.

• Increases share repurchase authorization by 67% to $5 billion, supporting per share growth through mid-2026.

• Plans to allocate up to 30% of annual free cash to reduce $2.5 billion of debt over the next 24 months, targeting <1.0x net debt-to-EBITDAX.

Synergies and expected cost savings

• Expects up to $50 million in annual average cost savings from operational efficiencies and marketing synergies.

• Midstream assets generate over $125 million of EBITDAX annually, primarily intercompany, with a $3-$5 per barrel uplift in realizations.

• Synergies stem from scale in the basin, improved rig and frack fleet utilization, and midstream infrastructure advantages.

• Combined Williston Basin inventory provides up to 10 years of drilling locations with high IRR potential.