Devon Energy Corp. is taking a step back from its position as a worldwide explorer for oil and natural gas.
The Oklahoma City-based independent oil and gas producer announced Monday it would sell off its Gulf of Mexico and international assets so it could focus on its onshore holdings in North America.
"Simply put, we have an overabundance of opportunities,” Chairman and CEO Larry Nichols said in a conference call. "This repositioning allows us to play to our strengths.”
Company officials estimated the sales could net as much as $7.5 billion after taxes.
"The proceeds will be allocated between accelerating our North American onshore opportunities and reducing debt,” Nichols said.
Nichols said Devon officials did not believe the value of the company’s international assets were adequately valued in its stock price.
"We believe that Devon will emerge from this position with the ability to fund growth throughout the cycles of oil and gas prices, resulting in sustainable, organic growth per share,” he said.
Devon has holdings — including more than 1,100 producing wells — in the Gulf of Mexico, China, Brazil and Azerbaijan.
"We expect to receive a great deal of interest in these assets,” Nichols said, noting they are often the subject of unsolicited inquiries.
The sales are expected to be completed by the end of 2010.
Devon President John Richels said the assets going on the auction block account for about 7 percent of the company’s estimated reserves and 11 percent of its production, but they command almost 30 percent of Devon’s current capital.
Richels said Devon will be able to significantly improve its capital efficiency by focusing its investments on its North American plays.
Devon plans to drill an additional 150 wells in Oklahoma in 2010 as part of its expansion effort.
Company officials estimate the new strategy will increase Devon’s annual production by 10 percent over the next four years.
Richels said that seems like a reasonable figure because Devon has notched 9 percent compound annual growth in the past even as the company funded its long-term portfolio.