Devon Energy and BP Announce Sales and Joint Venture

Last November, Devon Energy Corporation said it planned to reposition the company. The company, one of Fortune magazine's "World's Most Admired Companies" and "100 Best Companies to Work For," is taking big steps to put the plan in action. Devon, an Oklahoma City oil and gas production company, says it has an agreement with British oil company BP. Devon will sell assets in Gulf of Mexico, Brazil and Azerbaijan to BP for $7 billion. This move will have BP taking over Devon's leases Transocean Deepwater Discovery rigs in Brazil and Seadrill West Sirius in Gulf of Mexico.

The companies have an oil sands joint venture in BP's Alberta, Canada, oil sands leases. BP is selling half of its interest in Kirby oil sands acreage to Devon for $500 million. Since top-tier resource Kirby is similar to the industry-leading Jackfish acreage, Devon hopes to leverage SAGD (steam assisted gravity drainage) expertise in Kirby.

Devon selling off international assets so it can focus on onshore North American exploration and production (E&P), an area in which the company excels. Devon makes the move believing it's the best bet for highest returns with the least amount of risk. The company's approach to add the Canadian joint venture while divesting international assets is part of its plan for more liquidity to help strengthen its balance sheet while lowering 2010 capital requirements by $400 million.

Furthermore, Devon expects high accretion in 2011 and beyond in earnings, cash flow, production and reserves. The company says its North American onshore E&P capital to contain 40 percent in shale plays and 22 percent in oil sands.

London-based BP enters the deal to venture into Brazil's emerging market and to use the strategic opportunity to establish long-term growth. BP expects to boost profits by over $3 billion in two to three years while increasing oil and gas production by 1 to 2 percent within five years.

Check out Devon's webcast.