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Devon Energy to buy shale peer WPX for USD2.56B in Delaware push

October 23/2020

MOSCOW (MRC) -- U.S. oil and gas producer Devon Energy Corp announced it will buy Permian basin peer WPX Energy Inc for USD2.56 billion as it looks to boost its presence in the Delaware portion of the prolific shale field, said Hydrocarbonprocessing.

The deal comes as U.S. shale companies post losses due to weak crude prices and struggle to raise new capital to restructure debt. But as producers seek out combinations to survive a coronavirus-induced slump in demand, deals at little or no premium are becoming the norm.

"Sector consolidation remains a critical focus, though we think news of a DVN/WPX combination is somewhat unexpected and could be complicated by likely shareholder votes on both sides given relatively similar market caps," Cowen analysts said.

Devon's deal is the second big merger after a price shock in April. In July, Chevron Corp agreed to buy Noble Energy Inc for USD5 billion. Devon said the deal, expected to close in early 2021, will help cut costs and increase annual cash flow by USD575 million by the end of next year.

The combined company, in which Devon will own 57% stake, will hold 400,000 net acres in the Delaware and can produce 277,000 barrels of oil per day. It will pay dividends using a "fixed plus variable" strategy, issuing a set 11 cents per share per quarter along with up to 50% of the remaining free cash flow.

Such a payout plan is seen as a new model for the industry that has fallen out of favor with investors after years of poor returns. As part of the deal, WPX shareholders will get 0.5165 shares of Devon common stock for each share of WPX common stock owned.

As MRC informed earlier, Devon Energy agreed with chemicals major Dow to jointly develop a portion of Devons STACK oil and gas acreage in central Oklahoma. Under the agreement, Devon will monetise half of its working interest in 133 undrilled locations in exchange for about USD100m, over the next four years.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's overall PE production totalled 1,712,400 tonnes in the first seven months of 2020, up by 58% year on year. Linear low density polyethylene (LLDPE) accounted for the greatest increase in the output. At the same time, overall PP production in Russia increased in January-July 2020 by 24% year on year to 1,063,700 tonne. ZapSibNeftekhim accounted for the main increase in the output.
Author:Anna Larionova
Tags:petroleum products, crude oil, PP, PE, neftegaz, petrochemistry, Dow.
Category:General News
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