(Reuters) -U.S. oil and gas producer Devon Energy has approached Enerplus, a peer with a market value of C$4 billion ($3 billion), with an acquisition offer, people familiar with the matter said on Thursday.
Such a combination would continue the dealmaking spree seen in the North American oil patch in recent months, which has included many of Devon's rivals -- including Exxon Mobil, Chevron and Occidental Petroleum -- making major acquisitions.
There is no certainty that Devon and Enerplus will negotiate a deal, the sources said, requesting anonymity because the matter is confidential. Devon's proposed acquisition terms could not be learned.
Devon declined comment. Enerplus did not immediately respond to a request for a comment.
Enerplus shares rose 7% to C$20.64 on the news in morning trading on Thursday. Devon Energy shares rose 2% to $42.08.
The hunt for better reserves and economies of scale has fueled consolidation in the U.S. oil and gas sector over the course of the past year. Exxon agreed to pay $59.5 billion for Pioneer Natural Resources and $4.9 billion for Denbury. Chevron inked a $53 billion deal for Hess and bought PDC Energy for $6.2 billion. Occidental clinched a $12 billion deal for CrownRock.
Enerplus operates mainly in the Bakken Basin in North Dakota, and also has a footprint in the Marcellus shale region in Pennsylvania. Were a deal to materialize, it would complement Devon's existing presence in North Dakota and reduce its reliance on the Delaware Basin in Texas and New Mexico.
Headquartered in Calgary, Enerplus sold its Canadian assets to Journey Energy and Surge Energy in 2022 to focus on its more lucrative U.S. acreage.
The bet has paid off, generating strong cash flow and allowing Enerplus to return $307 million to shareholders in 2023. The company has said it expects to return approximately 70% of its free cash flow to shareholders through share buybacks and dividends in 2024.
Enerplus shares have underperformed many of those of its peers, however, as investors fret about the company spending more to generate the same levels of production. Its capital spending totaled $532 million in 2023, up from $432 million in 2022.
Prior to news of the potential deal with Devon, Enerplus shares had dropped 18% in the last 12 months, compared to a 6% drop in the S&P 500 Energy Index.
Devon's shares have performed even worse, down 34% in the last 12 months. The Oklahoma City-based company, which has a market value of $26 billion, has also been grappling with high production costs and has struggled to meet its performance goals.
Devon Energy (DVN) Update - Feb 8
Devon Energy (DVN) Update - Feb 8
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Devon Energy (DVN) Update - Feb 8
EnerPlus Update dated January 25th with my comments in blue.
FOURTH QUARTER 2023 UPDATE
Production in the fourth quarter of 2023 exceeded the top end of the Company's guidance ranges with total production of 103,500 BOE per day (guidance of 95,000 to 99,000 BOE per day), and liquids production of 67,100 barrels per day (guidance of 60,500 to 64,500 barrels per day). The outperformance was driven by continued strong productivity from both the Company's 2023 well program and base production. < Devon's estimated Q4 2023 production is 650,000 Boepd (315,000 crude oil & 164,000 NGLs).
The Company's 2023 annual average production also exceeded the high end of the guidance ranges and was 100,000 BOE per day (guidance of 98,000 to 99,000 BOE per day), including liquids production of 62,200 barrels per day (guidance of 60,500 to 61,500 barrels per day).
Capital spending in the fourth quarter of 2023 was $91 million. This resulted in capital spending of $532 million for the full-year of 2023 – approximately the mid-point of the Company's guidance range of $520 to $540 million. < This is low capex for a company of this size, so EnerPlus is generating a lot of free cash flow from operations.
In the fourth quarter of 2023, Enerplus returned $106 million to shareholders through the repurchase of 5.8 million common shares for $16.09 per share and $12 million in dividends. This resulted in a return of capital of $307 million for the full-year of 2023.
OPERATIONAL UPDATE
During mid-January 2024, extremely cold temperatures led to power outages and production disruptions in North Dakota. Enerplus' impacted production has now been largely restored. However, as a result of the storm, the Company estimates its first quarter liquids production will be approximately 2,000 to 3,000 barrels per day lower than previously forecast.
Despite this, Enerplus remains well positioned to efficiently execute its 2024 operational plan. Inclusive of the impacts from the January weather event, the Company anticipates delivering 2024 liquids production of approximately 64,000 barrels per day with annual capital spending of approximately $550 million. Enerplus will provide 2024 guidance in connection with its fourth quarter and full-year 2023 results to be released on February 22nd, 2024. < My SWAG is that the acquisition of ERF would add ~$1 billion of additional operating cash flow for Devon in 2024 and ~$500 million of additional free cash flow from operations.
FOURTH QUARTER AND FULL-YEAR 2023 RESULTS CONFERENCE CALL DETAILS
Enerplus will be releasing comprehensive operating and financial results for the fourth quarter and full-year 2023, including reserves, after market close on Thursday, February 22, 2024. A conference call will be hosted by Enerplus' President & CEO, Ian C. Dundas on February 23, 2024, at 9:00 AM MT (11:00 AM ET) to discuss these results. Details of the conference call are noted below.
FOURTH QUARTER 2023 UPDATE
Production in the fourth quarter of 2023 exceeded the top end of the Company's guidance ranges with total production of 103,500 BOE per day (guidance of 95,000 to 99,000 BOE per day), and liquids production of 67,100 barrels per day (guidance of 60,500 to 64,500 barrels per day). The outperformance was driven by continued strong productivity from both the Company's 2023 well program and base production. < Devon's estimated Q4 2023 production is 650,000 Boepd (315,000 crude oil & 164,000 NGLs).
The Company's 2023 annual average production also exceeded the high end of the guidance ranges and was 100,000 BOE per day (guidance of 98,000 to 99,000 BOE per day), including liquids production of 62,200 barrels per day (guidance of 60,500 to 61,500 barrels per day).
Capital spending in the fourth quarter of 2023 was $91 million. This resulted in capital spending of $532 million for the full-year of 2023 – approximately the mid-point of the Company's guidance range of $520 to $540 million. < This is low capex for a company of this size, so EnerPlus is generating a lot of free cash flow from operations.
In the fourth quarter of 2023, Enerplus returned $106 million to shareholders through the repurchase of 5.8 million common shares for $16.09 per share and $12 million in dividends. This resulted in a return of capital of $307 million for the full-year of 2023.
OPERATIONAL UPDATE
During mid-January 2024, extremely cold temperatures led to power outages and production disruptions in North Dakota. Enerplus' impacted production has now been largely restored. However, as a result of the storm, the Company estimates its first quarter liquids production will be approximately 2,000 to 3,000 barrels per day lower than previously forecast.
Despite this, Enerplus remains well positioned to efficiently execute its 2024 operational plan. Inclusive of the impacts from the January weather event, the Company anticipates delivering 2024 liquids production of approximately 64,000 barrels per day with annual capital spending of approximately $550 million. Enerplus will provide 2024 guidance in connection with its fourth quarter and full-year 2023 results to be released on February 22nd, 2024. < My SWAG is that the acquisition of ERF would add ~$1 billion of additional operating cash flow for Devon in 2024 and ~$500 million of additional free cash flow from operations.
FOURTH QUARTER AND FULL-YEAR 2023 RESULTS CONFERENCE CALL DETAILS
Enerplus will be releasing comprehensive operating and financial results for the fourth quarter and full-year 2023, including reserves, after market close on Thursday, February 22, 2024. A conference call will be hosted by Enerplus' President & CEO, Ian C. Dundas on February 23, 2024, at 9:00 AM MT (11:00 AM ET) to discuss these results. Details of the conference call are noted below.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Devon Energy (DVN) Update - Feb 8
Based on Devon's guidance for 2024, as a standalone company they should generate approximately $6.5 billion of operating cash flow and $3.0 billion of free cash flow in 2024.
You can find my updated forecast model for Devon under the Sweet 16 tab on the EPG website.
You can find my updated forecast model for Devon under the Sweet 16 tab on the EPG website.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Devon Energy (DVN) Update - Feb 8
TipRanks: "In the last 3 months, 3 ranked analysts set 12-month price targets for ERF. The average price target among the analysts is $18.58."
ERF has a market cap of around $3.2 billion.
ERF has a market cap of around $3.2 billion.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Devon Energy (DVN) Update - Feb 8
Devon Energy Could Soon Join the Oil Patch Acquisition Binge
Matthew DiLallo, The Motley Fool
Fri, Feb 9, 2024, 4:00 AM CST
https://finance.yahoo.com/news/devon-energy-could-soon-join-100000379.html
Matthew DiLallo, The Motley Fool
Fri, Feb 9, 2024, 4:00 AM CST
https://finance.yahoo.com/news/devon-energy-could-soon-join-100000379.html
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group