8-KMaterial AgreementsFinancial EventsRegulation FD+1

DEVON ENERGY CORP/DE 8-K Report, Material Agreement (Dec 18, 2019)

Filed December 18, 2019For Securities:DVN

Summary

Devon Energy Corporation (DVN) announced on December 17, 2019, a significant strategic divestiture of its Barnett Shale assets through its subsidiary, Devon Energy Production Company, L.P., to BKV Barnett, LLC for $770 million in cash. This sale marks a pivotal moment in the company's strategy, completing its pivot to U.S.-only operations with a primary focus on oil development and production. In conjunction with this sale, Devon Energy expects to record a substantial non-cash, pre-tax impairment charge between $650 million and $750 million in the fourth quarter of 2019. This charge reflects the difference between the carrying value of these assets and their estimated adjusted sale price. The Barnett Shale assets represented a significant portion of the company's proved reserves, exceeding 40%, highlighting the magnitude of this strategic shift. The transaction is anticipated to close in the second quarter of 2020, subject to regulatory approvals.

Key Highlights

  • 1Divestiture of Barnett Shale assets for $770 million in cash to BKV Barnett, LLC.
  • 2Completes Devon Energy's strategic shift to U.S.-only operations focused on oil development and production.
  • 3Expects a non-cash, pre-tax impairment charge of approximately $650 million to $750 million in Q4 2019.
  • 4The sale includes customary representations, warranties, covenants, and indemnity obligations.
  • 5Transaction is subject to customary closing conditions, including Hart-Scott-Rodino antitrust review.
  • 6Expected closing date in the second quarter of 2020.
  • 7Barnett Shale assets represented over 40% of the Company's total proved reserves prior to the sale.

Frequently Asked Questions

This 8-K filing reports on Devon Energy's entry into a material definitive agreement to sell its Barnett Shale assets and the resulting classification of these assets as held for sale, which necessitates reporting a material impairment.

Devon Energy expects to recognize a non-cash, pre-tax charge to earnings of approximately $650 million to $750 million in the fourth quarter of 2019. This charge reflects the difference between the assets' carrying value and the estimated adjusted purchase price.

The transaction is expected to close in the second quarter of 2020, subject to regulatory approvals, including those under the Hart-Scott-Rodino Antitrust Improvements Act.

This sale is a key step in Devon Energy's strategic transformation, completing its shift to U.S.-only operations that are predominantly focused on the development and production of crude oil.