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Devon Energy to Acquire Eagle Ford Operator Validus Energy
Friday 12 August 2022

US-based Devon Energy Corp. (NYSE: DVN) has entered into a definitive purchase agreement to acquire Eagle Ford operator Validus Energy for total cash consideration of USD 1.8bn, the company said.

The transaction is subject to customary terms and conditions and is expected to close at the end of 3Q22.

Devon Energy said the transaction is valued at 2-times cash flow, with a free cash flow yield of 30% at strip pricing over the next year.

It expects the acquisition to be immediately accretive to all relevant per-share metrics in the first year, including earnings, cash flow, free cash flow and net asset value.

Devon said the acquisition secures a premier acreage position of 42,000 net acres (90% working interest) adjacent to Devon's existing leasehold in the basin.

Validus's current production is approximately 35,000 Boe per day (70% oil), with volumes expected to increase to an average of 40,000 Boe per day over the next year.

The transaction also adds 350 repeatable drilling locations in the core of the Karnes Trough oil window along with 150 high-quality refrac candidates.

This highly economic inventory positions the company's Eagle Ford assets to sustain its high-margin production and free cash flow generation for several years.

Captures high-margin production The acquired assets provide high cash operating margins through access to premium Gulf Coast pricing and low per-unit expenses.

With enhanced scale in the basin, Devon expects to realize USD 50m in average annual cash flow savings from capital efficiencies, operating improvements, and marketing synergies.

Maintains top-tier balance sheet Devon's pro forma leverage metrics will remain relatively unchanged, exiting the year with an expected net debt-to-EBITDAX ratio of 0.4 times at strip pricing.

This balance sheet strength preserves the company's financial and operational flexibility and allows for the accelerated return of capital to shareholders.

Devon Energy is an oil and gas producer in the US with a premier multi-basin portfolio headlined by a world-class acreage position in the Delaware Basin.
Date Published: 12/08/2022