In a major upstream and midstream acquisition, Oklahoma-based Devon Energy announced Monday that it has agreed to purchase the Willison Basin holdings of EnCap-backed Grayson Mill Energy for $5 billion.
The terms include $1.75 billion in stock and $3.25 billion in cash for assets that include 307,000 net acres in the Bakken region that carry with them a 70 percent working interest, as well as 950 miles of gathering systems that sprawl between North Dakota and Montana.
“The acquisition of Grayson Mill is an excellent strategic fit for Devon that allows us to efficiently expand our oil production and operating scale while capturing a meaningful runway of highly economic drilling inventory,” said Rick Muncrief, Devon’s president and CEO in a release.
The stock portion of the purchase includes 37 million shares of common shares, and the company says it plans to finance the cash portion of the purchase price with cash-on-hand and debt.
According to Devon, the transaction is immediately accretive to the company’s earnings, cash flow, free cash flow and net asset value. The assets were acquired at less than 4-times EBITDAX, with a free cash flow yield of 15 percent at a presumed $80 per barrel WTI oil price.
Devon expects to realize up to $50 million in average annual cash flow savings from operating and marketing synergies with the addition of 500 locations and 300 high-quality refrac candidates.
Citi is acting as Devon’s financial advisor with Kirkland & Ellis as outside legal counsel.
The Kirkland team included corporate partners David Castro Jr., Lindsey Jaquillard and Kyle Watson and associates Jarrod Gamble, Rizwan Popatia and Carli Gish.
Vinson & Elkins is counseling the Grayson Mill entities (Grayson Mill II and Grayson Mill III) with a team led from Houston by partner Bryan Loocke, counsel Elena Sauber and associate Drew Clements, with assistance from associates Brian Broussard, Destiny Alliniece and Rammy Allouche.
Other key team members include partners Todd Way and Megan James, senior associate Dan Henderson and associate Ryan Dolmanet (tax); partners Mike Marek, Jackson O’Maley, Matt Strock, senior associate David Lassetter, and associates Walt Baker, Rivers Stephens and Mimi Nguyen (corporate); partner David D’Alessandro, counsel Regina Ibarra and associate Cassandra Zarate (benefits); partner Becky Baker and associate Peter Goetschel (labor/employment) partner Hill Wellford and counsel Evan Miller (antitrust); and partner Damien Lyster (energy regulatory).
Houston-based EnCap has been extremely active of late. In 2023 EnCap/Grayson Mill had purchased assets in the Williston Basin from Denver-based Ovintiv for $825 million, while selling to Onitiv three major Permian producing properties for $4.275 billion. Kirkland and V&E were involved in those transactions, as well.
In mid-June, EnCap sold $2 billion in Permian assets to Dallas-headquartered Matador Resources and, just last month, shed assets in the Uinta Basin for $2.55 billion.
In March 2023, Dallas-based Pearl Energy purchased Bakken assets from Grayson Mill for $22 million.