Devon sells some Eagle Ford assets

[dan_s]

Penn Virginia Corp. (Nasdaq: PVAC), which moved its headquarters to Houston last year, announced a deal July 31 to buy Eagle Ford assets from Oklahoma City-based Devon Energy Corp. (NYSE: DVN) for $205 million in cash. The deal is targeted to close by Sept. 30, and Penn Virginia expects the purchase price will be adjusted to about $190 million to reflect estimated net cash flows from the effective date to closing.

The assets consist of about 19,600 net acres located primarily in Lavaca County, Texas. They are contiguous to Penn Virginia’s core operations and increase the company’s net acreage by 35 percent and its net production by about 30 percent, or approximately 3,000 barrels of oil equivalent per day, of which about 64 percent is oil. The acquisition also includes an infield gathering and compression system with no volume commitments or acreage dedications.

The deal increases Penn Virginia’s net drilling inventory by about 23 percent, and the company plans to modify its development program by shifting one of its drilling rigs to an area predominately in the acquired acreage.

Penn Virginia will finance the deal with its new $150 million of committed debt financing and borrowings under its credit facility. The company also is in discussions with its bank lending group to boost its reserve-based credit facility above its current borrowing base of $200 million.

In a press release, John Brooks, interim principal executive officer and COO, called the deal “an excellent fit and an important step in our long-term growth strategy.”

“Our operations team knows this area extremely well as the Devon acreage is contiguous to our existing acreage position,” Brooks said in the release. “We will utilize our technical capabilities to optimize production and reduce operating and administrative costs per BOE on the acquired assets, while significantly increasing the size and scale of our company. In summary, we are acquiring high quality properties at an attractive price that will provide Penn Virginia many years of drilling inventory with enhanced economics even in today’s commodity price environment.”