DBRS Comments on Devon Energy Corporation’s Sale of its Canadian Conventional Assets

DBRS notes that on February 19, 2014, Devon Energy Corporation (Devon or the Company, rated BBB (high)) announced the sale of the majority of its Canadian conventional assets for $2.8 billion to Canadian Natural Resources Limited (rated BBB (high)). The sale, which excludes Devon’s Horn River and thermal heavy oil assets, is expected to close in April 2014. Upon closing of the transaction, Devon plans to use the estimated $2.7 billion of proceeds to pay down debt incurred in the Company’s $6.0 billion acquisition ($4.5 billion debt; $1.5 billion cash) of Eagle Ford assets announced in November 2013, which is expected to close in Q1 2014.

DBRS estimates the anticipated increase in production and cash flow from the acquisition of the Eagle Ford assets will more than offset the loss of production and cash flow associated with the Canadian assets disposal. With the expected use of proceeds from this asset sale to pay down debt, DBRS expects Devon’s credit metrics to be in line with its current rating category and will most likely remove Devon’s ratings from being Under Review with Negative Implications upon closing of the disposal.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Oil and Gas Industry, which can be found on the DBRS website under Methodologies.