Devon Energy Corp. said it signed an agreement to sell one third of its interest in five new plays to Sinopec International Petroleum Exploration & Production Corp. (SIPC) for $2.2 billion.
Before the agreement, Devon had assembled 1.2 million net acres in the company’s previously announced positions in the Tuscaloosa Marine shale, Niobrara, Mississippian, Ohio Utica shale, and the Michigan basin.
The companies have recently added acreage in the Ohio Utica shale, increasing their joint position in the play to 235,000 net acres.
SIPC also will reimburse Devon for drilling costs incurred prior to closing and acreage acquisition costs incurred subsequent to the effective date of the agreement.
SIPC will make a $900 million cash payment upon closing and $1.6 billion paid in the form of a drilling carry.
The drilling carry will fund 70% of Devon’s capital requirements, which results in SIPC paying 80% of the overall development costs during the carry period.
Based on the current work plan, the company expects the entire $1.6 billion carry to be realized by yearend 2014. Through 2012, the companies expect to drill about 125 gross wells in the five plays.
Devon will serve as the operator and will have ultimate responsibility for the allocation of capital. The company is also responsible for commercially marketing all production from these plays into the North American market.
Contact Eric Watkins at firstname.lastname@example.org.