Oil and natural gas producer Devon Energy said Monday it was selling about $1 billion of gas production and other assets as part of its program to cut costs through upstream divestitures.
Devon’s rose more than 4.5% on news of the sales of producing assets in east Texas for $525 million, non-core upstream properties in the Anadarko Basin of western Oklahoma and the Texas Panhandle for $310 million, and a royalty interest in 11,000 net acres of the northern Midland Basin in Texas for $139 million.
“Combined with other recent asset sales, we have now announced $1.3 billion of gas-focused upstream divestiture,” Devon CEO Dave Hager said in a news release. “As we’ve said previously, proceeds from these tax-efficient transactions will be utilized to further strengthen our investment-grade financial position.”
Hager added that with the recent rally in oil prices, Devon has been making progress in marketing its remaining non-core oil assets in the Midland Basin and its 50% stake in Canada’s Access Pipeline, which carries heavy oil across northeastern Alberta.
“Proceeds for the entire divestiture program are well on their way to achieving our previously announced range of $2 billion to $3 billion in 2016,” he said.
Earlier this year, Devon agreed to sell Mississippian assets in northern Oklahoma for $200 million to White Star Petroleum. the company so far in 2016 has also The company so far this year has also laid off about 1,000 employees, closed its Houston office, cut its common stock dividend by 75% and reduced its drilling budget 75% from 2015.
“Like most oil and natural gas companies, Devon has slashed costs and budgets over the past year and a half as commodity prices have tumbled,” The Oklahoman said.
The east Texas properties Devon is selling averaged net production of 22,000 barrels of oil equivalent per day in the first quarter and had proved reserves of 87 million equivalent barrels as of the end of 2015.
“The company has come to realize that a weak balance sheet cannot be easily sustained, even as oil prices move higher,” The Street said.