We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Devon (DVN) to Buy RimRock Oil and Gas, Expand in Williston
Read MoreHide Full Article
Devon Energy (DVN - Free Report) announced that it has entered into a definitive agreement to acquire leasehold interest and related assets of RimRock Oil and Gas, LP, in Williston Basin for $865 million. This acquisition is expected to close in the third quarter of 2022, after necessary approvals.
Devon presently has a premier multi-basin portfolio and this acquisition will further expand DVN’s holding in the Williston Basin.
What Does This Acquisition Offer?
This acquisition will expand Devon’s Williston Basin acreage by 38,000 acres to 123,000 acres. RimRock will add nearly 15,000 barrels of oil equivalents (Boe) per day to DVN’s Williston Basin production, taking volumes to 63,000 Boe per day. Production volumes are expected to increase to 20,000 Boe per day next year. About 78% of the current production from RimRock Oil and Gas is oil.
This Williston deal will add more than 100 economic undrilled inventory locations, assisting Devon to maintain its high-margin production and strong cash flow for several years.
Given the ongoing strength in commodity prices, this deal, when closed, will be immediately accretive to earnings and free cash flow of the company. Devon’s board of directors are planning to share the benefit of this deal with shareholders by increasing the fixed quarterly dividend by 13% after closure of the transaction. This acquisition is also expected to support Devon’s variable dividend in 2022 and beyond.
M&A Activity in Williston
In March 2022, Whiting Petroleum Corporation and Oasis Petroleum Inc. announced a $6 billion merger deal. This deal will create a premier oil and gas company in the Williston Basin. The combined company will enjoy the benefit of enhanced operating scale and free cash flow. This deal is expected to close in the second half of 2022.
The Zacks Consensus Estimate for 2022 earnings per share for Whiting Petroleum and Oasis Petroleum reflects year-over-year growth of 87.6% and 279.3% respectively. Whiting Petroleum and Oasis Petroleum reported average surprise of 12.8% and 19.6%, respectively, in the last four quarters.
The recent US Geological Survey (“USGS”) assessment of Williston basin’s Bakken and Three Forks formations within Montana and North Dakota include 4.3 billion barrels of unconventional oil and 4.9 trillion cubic feet of unconventional natural gas. So, the decision of Devon Energy to expand its operation in Williston Basin is quite justified and more M&A deal is expected in the region.
Can Revival in Prices Boost M&A?
Rising demand for oil and gas and recovery in prices from historic lows should ideally open up new doors for merger and acquisition (“M&A”) activities in the oil and energy sector. In reality, the operators in the space are taking very cautious steps, taking into consideration the developments in Russia and Ukraine, rising inflation and transition toward clean energy sources.
The same view has been echoed in a report from GlobalData, which shows that $59 billion worth M&A deals were announced during first-quarter 2022. This indicates a sequential decline of 41% from fourth-quarter 2021.
Price Performance
Devon Energy has risen 89.6% in the past six months compared with its industry’s 67% rally.
The long-term (three to five years) earnings growth of CNX Resources is currently pegged at 19.7%. The Zacks Consensus Estimate for 2022 earnings per share of CNX has moved up by 42.9% in the past 60 days to $3 per share.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Devon (DVN) to Buy RimRock Oil and Gas, Expand in Williston
Devon Energy (DVN - Free Report) announced that it has entered into a definitive agreement to acquire leasehold interest and related assets of RimRock Oil and Gas, LP, in Williston Basin for $865 million. This acquisition is expected to close in the third quarter of 2022, after necessary approvals.
Devon presently has a premier multi-basin portfolio and this acquisition will further expand DVN’s holding in the Williston Basin.
What Does This Acquisition Offer?
This acquisition will expand Devon’s Williston Basin acreage by 38,000 acres to 123,000 acres. RimRock will add nearly 15,000 barrels of oil equivalents (Boe) per day to DVN’s Williston Basin production, taking volumes to 63,000 Boe per day. Production volumes are expected to increase to 20,000 Boe per day next year. About 78% of the current production from RimRock Oil and Gas is oil.
This Williston deal will add more than 100 economic undrilled inventory locations, assisting Devon to maintain its high-margin production and strong cash flow for several years.
Given the ongoing strength in commodity prices, this deal, when closed, will be immediately accretive to earnings and free cash flow of the company. Devon’s board of directors are planning to share the benefit of this deal with shareholders by increasing the fixed quarterly dividend by 13% after closure of the transaction. This acquisition is also expected to support Devon’s variable dividend in 2022 and beyond.
M&A Activity in Williston
In March 2022, Whiting Petroleum Corporation and Oasis Petroleum Inc. announced a $6 billion merger deal. This deal will create a premier oil and gas company in the Williston Basin. The combined company will enjoy the benefit of enhanced operating scale and free cash flow. This deal is expected to close in the second half of 2022.
The Zacks Consensus Estimate for 2022 earnings per share for Whiting Petroleum and Oasis Petroleum reflects year-over-year growth of 87.6% and 279.3% respectively. Whiting Petroleum and Oasis Petroleum reported average surprise of 12.8% and 19.6%, respectively, in the last four quarters.
The recent US Geological Survey (“USGS”) assessment of Williston basin’s Bakken and Three Forks formations within Montana and North Dakota include 4.3 billion barrels of unconventional oil and 4.9 trillion cubic feet of unconventional natural gas. So, the decision of Devon Energy to expand its operation in Williston Basin is quite justified and more M&A deal is expected in the region.
Can Revival in Prices Boost M&A?
Rising demand for oil and gas and recovery in prices from historic lows should ideally open up new doors for merger and acquisition (“M&A”) activities in the oil and energy sector. In reality, the operators in the space are taking very cautious steps, taking into consideration the developments in Russia and Ukraine, rising inflation and transition toward clean energy sources.
The same view has been echoed in a report from GlobalData, which shows that $59 billion worth M&A deals were announced during first-quarter 2022. This indicates a sequential decline of 41% from fourth-quarter 2021.
Price Performance
Devon Energy has risen 89.6% in the past six months compared with its industry’s 67% rally.
Image Source: Zacks Investment Research
Zacks Rank & Key Pick
Devon Energy currently has a Zacks Rank #3 (Hold). A top-ranked stock in the same space currently sporting a Zacks Rank #1 (Strong Buy) is CNX Resources (CNX - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term (three to five years) earnings growth of CNX Resources is currently pegged at 19.7%. The Zacks Consensus Estimate for 2022 earnings per share of CNX has moved up by 42.9% in the past 60 days to $3 per share.