Devon Energy to buy Ocean Energy

Oklahoma City-based Devon Energy is to buy rival Ocean Energy for $5.3 billion, and in the process will create the biggest independent oil and gas producer in the US.

The deal, announced on February 24, will give the combined company production capacity of about 2.4 billion cubic feet of natural gas and about 250,000 barrels of oil and natural gas liquids per day. The new company, which will be called Devon Energy Corp and based in Oklahoma City, will be worth about $20 billion.

The move will give Devon Energy increased access to international assets and reserves through Ocean Energy’s activities in west Africa, Egypt, Brazil and Indonesia. “Combining our two companies creates a balanced portfolio, with North American and international assets, increased oil and gas production capabilities and greater internal growth opportunities through an active exploration programme,” said Devon Energy’s chairman, president and chief executive Larry Nichols in a conference call to announce the merger.

The merger will boost Devon Energy’s proven reserves to 2.2 billion barrels of oil equivalent, of which 84% will be in North America. Overall, 90% of the company’s worldwide production will come from North America.

Nichols will retain the positions of chairman and chief executive in the new company. James Hackett, currently chairman of Houston-based Ocean Energy, will become president and chief operating officer.

Hackett said in a statement: “This merger provides a commodity mix weighted positively towards North American natural gas and creates a better balance between exploration and exploitation, minimising the risk associated with high-impact exploration.” Ocean Energy’s international exploration projects are considered higher-risk by analysts than the US and Canadian natural gas production that forms the core of Devon Energy’s output.

The merger has been approved by the boards of both companies and will be put to shareholders in the near future. If shareholders vote in favour, the merger is expected to be completed in the second or third quarter of 2003, say the firms.