Devon Energy Corp. has signed a joint venture agreement worth $1.4 billion with Japan’s Sumitomo Corp. to help develop its holdings in west Texas’ Permian Basin, the company announced Tuesday morning.
Sumitomo’s investment will yield a 30 percent stake in Devon’s acreage in the Cline Shale and the Midland-Wolfcamp Shale. Devon has about 650,000 acres in the oil-rich plays.
“This transaction once again demonstrates the value embedded in our high-quality portfolio,” Devon CEO John Richels said. “This arrangement will materially enhance Devon’s future returns and improve our capital efficiency. It will also further enhance our financial strength. For quite some time we have had a strong working relationship with Sumitomo and look forward to a mutually beneficial joint venture.”
Sumitomo will pay Devon about $340 million in cash when the deal closes. The remaining $1.025 billion in the deal with be a drilling carry that will fund about 70 percent of Devon’s capital requirements.
The partners expect to drill 40 wells in the targeted plays this year.
The Sumitomo deal is Devon’s second joint venture with an Asian firm this year.
The Oklahoma City-based company sealed a $2.5 billion deal with China’s Sinopec International Petroleum Exploration & Production Corp. in January. Sinopec acquired a stake in Devon’s 1.2 million net acres in five developing plays: the Tuscaloosa Marine Shale, Niobrara, Mississippian, Ohio Utica Shale and the Michigan Basin.