Devon Energy agrees to sell its Canadian operations for $2.8 billion

Data by YCharts

Data by YCharts

Calgary-based oil company Canadian Natural Resources Ltd. has signed a deal to buy the Canadian operations of Devon Energy Corp. for $3.8 billion.

Analyst Phil Skolnick of Eight Capital agreed the Devon assets represent a good fit for Canadian Natural, known by its stock symbol, CNQ.

All produce raw bitumen crude using steam-assisted gravity drainage technology, where steam is injected into a horizontal well to melt the heavy sticky oil and allow it to drip into a parallel well to be pumped to surface.

It also owns conventional heavy oil wells near Lloydminster, Alta.

Devon's production is now restricted to about 122,800 bpd because of Alberta government production curtailments.

In February this year, Devon Energy said that it would be looking to sell its Canadian assets to become a high-return US oil growth business in what analysts described as a "long-overdue" announcement from the USA oil company.

"The sale of Canada (assets) is an important step in executing Devon's transformation to a US oil growth business", Chief Executive Dave Hager said in a statement.

The sale includes assets that averaged 113,000 oil-equivalent barrels in the first quarter of this year.

Devon is the latest foreign company to either or dramatically scale back exposure to the Canadian oil sands in order to focus on USA scale or other global assets.

The deal is expected to close by June 27, but its effective date is January 1, 2019.

The company expects to be able to continue to maintain its dividend and share buyback programs and its balance sheet will continue to strengthen despite the new debt, he added.

Canadian Natural Resources, the biggest Canadian oil and gas producer by volume, said its acquisition of the assets, which are adjacent to its operations and include 1.5 million acres of land, would save C$135 million in costs over the next year.

Canadian Natural says it will add about 735 new employees from Devon, including both field and head office personnel. At the end of a year ago, proved reserves associated with the properties amounted to about 409 MMbbl of oil.

The production acquired under the deal totals 128,300 barrels per day, including 108,200 from the thermal in situ operations and 20,100 from the conventional operations.

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