Devon Energy Sells Barnett Shale Assets For $570M


Days after announcing plans to merge with Tulsa-based WPX Energy (WPX), Devon Energy completed the sale of its natural gas assets in the Barnett Shale to Banpu Kalnin Ventures for $570 million.

Devon Energy (DVN) received a cash payment of $320 million from Banpu Kalnin after adjusting for the $170 million deposit it received in April. The company is eligible to receive additional cash payments of up to $260 million over the next four years based on future commodity rates. The contingent payments will start if the Henry Hub natural gas price rises above $2.75 or West Texas Intermediate oil price rises above $50.

In August, Devon announced that it would issue a special dividend of $0.26 per share related to the Barnett sale, resulting in an aggregate payment of $100 million, which was in addition to the regular cash dividend. On Oct. 2, Lisa Adams, Devon’s corporate communications director, confirmed to The Oklahoman the issuance of the special dividend. (See DVN stock analysis on TipRanks).

On Sept. 29, Truist Financial analyst Neal Dingmann upgraded Devon to Buy from Hold saying that the company looks much stronger post-deal, especially as it gives an assurance about the company’s dividend.

The analyst believes that the yield could climb over 10% by next year, when measured on the current stock price. In response, the analyst raised his price target to $16 (66.7% upside potential) from $14 previously.

Currently, the Street has a bullish outlook on Devon Energy stock. The Strong Buy consensus is based on 14 Buys and 3 Holds with no Sells. The average analyst price target of $15.56 implies upside potential of about 62%. However shares have declined 62.3% year-to-date.

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