(By Balaseshan) Devon Energy Corp. (NYSE:DVN) said it has completed its previously announced $1.4 billion joint venture agreement with Sumitomo Corp.
The joint venture covers about 650,000 net acres in the Cline Shale and the Midland-Wolfcamp Shale. Sumitomo will invest $1.4 billion in exchange for 30% of Devon's interest in these projects.
At closing, Sumitomo invested $410 million in cash, composed of the initial cash contribution and Sumitomo's share of costs since the effective date of the transaction. The remaining $980 million will be invested in the form of a drilling carry.
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The drilling carry will fund 70% of Devon's capital requirements, resulting in Sumitomo paying 79% of the overall drilling and completion costs during the carry period. Devon will serve as operator and expects the entire drilling carry to be realized by mid-2014.
"With the close of the Sumitomo transaction, we have now successfully entered two exploration joint ventures during 2012, approaching $4 billion in value to our company. These arrangements significantly improve the capital efficiency of our exploration programs which preserves cash flow for our deep inventory of development projects," said John Richels, Devon's chief executive.
DVN is trading up 3.03% at $60.79 on Thursday. The stock has been trading between $50.74 and $76.34 for the past 52 weeks.