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Devon Energy and BP Enter Into $7.0B Property Sales Agreement and Oil Sands Joint Venture

Devon Energy Corporation has entered into agreements to sell all of its assets in the deepwater Gulf of Mexico, Brazil and Azerbaijan to BP for $7.0 billion in cash. In addition, BP will assume Devon’s leases of the Seadrill West Sirius and Transocean Deepwater Discovery drilling rigs for the duration of the contract terms. Devon and BP will also form a heavy oil joint venture to develop BP’s Kirby oil sands leases in Alberta, Canada.

In order to facilitate the oil sands joint venture, Devon will acquire 50% of BP’s interest in the Kirby oil sands leases. Devon will pay BP $500 million at closing and commit to fund an additional $150 million of capital costs on BP’s behalf. The undeveloped Kirby oil sands leases are in the south east of the Athabasca region of Alberta, close to the Devon-operated Jackfish development, which started production in 2007.

Like Jackfish, the Kirby oil sands are suitable for in situ development using steam-assisted gravity drainage (SAGD). BP and Devon have agreed an initial appraisal program to assess the significant potential of the Kirby acreage and to establish a long-term development plan. In addition to forming the joint venture, BP and Devon have agreed to enter into a long-term heavy crude off-take agreement for production from the Kirby development as well as a portion of the production from some of Devon’s other oil sands assets.

BP is currently undertaking a major investment programme at its Whiting, Indiana, refinery, significantly increasing its capacity to process heavy crudes such as Canadian heavy oil. The Whiting upgrade is planned to come on-stream in 2012.

This strategic opportunity fits well with BP’s operating strengths and key interests around the world, offering us significant additional long-term growth potential with an emphasis on high-margin oil. As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen our position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets.

—BP group chief executive Tony Hayward

The deal will give BP a diverse and broad deepwater exploration acreage position offshore Brazil with interests in eight licence blocks in the Campos and Camamu-Almada basins, in water depths ranging from 330 to 9,100 feet (100-2,780 meters), as well as two onshore licences in the Parnaiba basin. The Campos basin blocks include three discoveries—Xerelete, pre-salt Wahoo and Itaipu—and the producing Polvo field.

In the US Gulf of Mexico deepwater, BP will gain a portfolio with interests in some 240 leases, with a particular focus on the emerging Paleogene play in the ultra-deepwater. The addition of Devon’s 30 per cent interest in the major Paleogene discovery Kaskida will give BP a 100% interest in the project. The assets also include interests in four producing oil fields: Zia, Magnolia, Merganser, and Nansen. In Azerbaijan, acquisition of Devon’s 5.63% stake in the ACG development will increase BP’s operating interest in the fields to 39.77%

On 16 November 2009, Devon announced plans to divest its Gulf of Mexico and international assets to allow the company to focus on its North American onshore assets. The divestiture proceeds will be allocated between the acceleration of development of Devon’s North American onshore properties and debt reduction.

The company has now announced the sale of the majority of the divestiture assets, and data rooms for the remaining divestiture properties in the Gulf of Mexico shelf, offshore China, and other minor international assets are currently open. Devon expects the closings of all divestitures to be completed prior to year-end.

Devon Energy Corporation is an Oklahoma City-based independent energy company engaged in oil and gas exploration and production.

Comments

Henry Gibson

It is now past time to have the US government start to loan money to finance coal to liquid fuel factories and to put at least a $35 import duty on all foreign fuels except mexico and canada of course. I doubt if there is much more carbon dioxide produced by converting coal to gasoline than ther is in producing gasoline from tar sands.

Cheap energy is the basis of any economy, but the US government is ignoring the need for cheap energy to pretend that the US can do something to reduce the present high concentration of CO2 caused by its giving away its manufacturing to China.

Canada should immediatly install a CANDU reactor to supply steam to the tar sands area. It does not need a new design or a long development. Just install the known design that was installed twice in China. Start tomorrow. Most people in the US believe that since the US did not order nuclear reactors after Three Mile Island, some were finished, that no other country did, but Canada and france and others ordered built and turned on many. There is almost no release of CO2 for the generation of electricity in France, and France sells nuclear power to all Europe and some might have gone all the way to Norway over the Dutch connection.

..HG..

HarveyD

HG:

I agree with you that the In Situ oil extraction method would be a lot cleaner if Nuclear energy was used to produce the steam and e-power required.

A second best choice could be a combination of Wind power and local NG. That combo could be put together very quickly. Cost and ecology wise it may not be the most advantageous but it would be more (locally) politically correct.

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