Devon puts Jackfish up for sale, and expects to find a buyer by year end

Devon puts Jackfish up for sale, and expects to find a buyer by year end

Oklahoma-based Devon Energy announced plans to divest its assets in the Barnett Shale and Canadian oil sands. Devon's key property in Canada is the Jackfish steam-assisted gravity drainage (SAGD) oil sands facility, located just south of Conklin, Alberta.

JACKFISH AND PIKE

Jackfish began production in 2007, and consists of three identical phases. The oil sands facility has a nameplate capacity of 105,000 bbl/day, but has consistently been able to top those numbers in recent years.

 

JACKFISH PRODUCTION AND STEAM PROFILE (CLICK FOR LIVE CHART →)

 

Including its Lloydminster heavy oil property, Devon averaged about 120,000 bbl/day of heavy oil from its Canadian operations in the fourth quarter of last year, including about 96,000 bbl/day of bitumen from Jackfish. Low oil prices forced it to voluntarily curtail production by about 17,000 bbl/day in Q4. First quarter production is expected to average about 115,000 bbl/day, net royalties.

Devon reported a loss of US$2.50 a barrel on its Canadian heavy oil production in Q4, versus a US$56 realized gain for its US oil output.

Devon also has a 50% interest in the adjacent Pike leases, owned jointly with BP. Provincial regulators approved the 70,000 bbl/day Pike 1 project in 2015. Devon submitted its environmental application for Pike 2 at the end of last year.

 

MAP COURTESY DEVON ENERGY

 

COURTESY DEVON ENERGY

THE NEW DEVON - MUCH SMALLER BUT MUCH MORE FOCUSED

Devon's Canadian assets accounted for almost one-quarter of its total output last year, and almost 40% of its liquids production. The company averaged 535,000 boe/day in 2018.

Devon says it wants to now focus on its four core US oil assets - Delaware, STACK, Eagle Ford and Powder River. The assets produced almost 300,000 boe/day at the end of last year, weighted 74% liquids. The company calls the four properties "high-margin and low cost," generating free cash flow at WTI prices above US$46 a barrel.

Devon says divesting the two properties "dramatically improves cost structure and margins," allowing it to save at least US$780 million annually by 2021. Some of those funds are expected to be used for debt repayment and share buybacks. Devon has already completed US$3.4 billion in share repurchases, with another US$1.6 billion expected by year-end.

The company says it has hired advisors to explore strategic alternatives, which could include an outright sale or spin-off. Devon says it expects to complete the divestiture of both its oil sands and Barnett Shale properties by the end of this year.

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