8-KAcquisitions & DispositionsRegulation FDExhibits & Filings

DEVON ENERGY CORP/DE 8-K Report, Acquisition Completed (Oct 2, 2020)

Filed October 2, 2020For Securities:DVN

Summary

Devon Energy Corporation (DVN) has officially completed the sale of its Barnett Shale assets through its subsidiary, Devon Energy Production Company, L.P., to BKV Barnett, LLC. The transaction, initially agreed upon in December 2019 and amended in April 2020, was finalized on October 1, 2020. The company received $490 million in net cash proceeds, which includes a prior $170 million deposit and is subject to purchase price adjustments. This divestiture is a significant step in Devon Energy's strategic repositioning, allowing it to focus on its core, higher-return assets. Investors should note the potential for additional contingent payments of up to $260 million, tied to future natural gas and oil prices, commencing in 2021 over a four-year period. The sale of the Barnett Shale assets represents a material change for Devon Energy, reducing its operational footprint in this particular basin. The cash generated from this sale provides the company with financial flexibility. The inclusion of earnout provisions highlights management's confidence in potential commodity price recovery, offering shareholders upside participation if market conditions improve. The company has also filed unaudited pro forma financial information to provide investors with a clearer picture of its financial position post-transaction.

Key Highlights

  • 1Devon Energy has completed the sale of its Barnett Shale assets to BKV Barnett, LLC for $490 million in net cash proceeds.
  • 2The transaction closed on October 1, 2020, after an initial agreement in December 2019 and an amendment in April 2020.
  • 3The net proceeds of $490 million include a $170 million deposit previously received in April 2020.
  • 4The sale agreement includes potential contingent earnout payments of up to $260 million, based on future commodity prices (natural gas above $2.75/MMBtu or WTI oil above $50/bbl).
  • 5The earnout period commences on January 1, 2021, and extends for four years.
  • 6Devon Energy has filed unaudited pro forma financial information to reflect the impact of this transaction.
  • 7The divestiture is part of Devon Energy's strategy to streamline its portfolio and focus on core assets.

Frequently Asked Questions

Devon Energy received $490 million in net cash proceeds from the sale of its Barnett Shale assets, after accounting for purchase price adjustments and including a $170 million deposit previously made by the purchaser.

Yes, the sale agreement includes contingent earnout payments of up to $260 million. These payments are contingent upon future commodity prices, specifically if the Henry Hub natural gas price averages $2.75 per million British thermal units (MMBtu) or higher, or if the West Texas Intermediate (WTI) oil price averages $50 per barrel or higher during the earnout period.

The contingent payment period begins on January 1, 2021, and will last for four years.

This divestiture is part of Devon Energy's ongoing strategy to focus on its core, higher-return assets and to streamline its portfolio, enhancing financial flexibility and operational efficiency.