Updated to reflect Devon Energy $2.2 billion shale spin to Sinopec
NEW YORK (
(DVN) is selling a 33% interest in five shale ventures to Chinese energy giant
(SIPC) for $2.2 billion, adding to a fast start for shale sales in 2012.
For the one-third shale stake, Sinopec will pay Devon Energy $900 million in cash and a further $1.6 billion in payments for drilling expenditures through 2014, roughly 70% of the projects exploration costs. The deal, along with a similar shale sale by
(TOT) of France on Tuesday signals that energy deals may stay hot in 2012 as foreign companies cut U.S. deals to bolster their reserves and build new drilling skills.
Devon Energy's divestiture follows a series of spins, including its deepwater oil exploration portfolio. In 2010, the Oklahoma City -based company sold $7 billion worth of U.S. deepwater assets to BP and it cut similar sales to
A.P Moeller Maersk
of China and U.S. -based
Sinopec's one-third shale asset purchase of Devon Energy shale assets, which include acreage in the Tuscaloosa Marine , Niobrara, Mississippian, Ohio Utica and the Michigan Basin shale formations is indicative of a wider push by Chinese companies into North American shale assets.
In October 2011, Sinopec spent $2.1 billion to buy Canadian shale specialist
. China has estimated that there are 1,275 trillion cubic feet of shale gas reserves in the U.S. and Canada,
reports, which is a higher than a similar assessment made by the U.S.
Energy Information Association
To read more on U.S. to watch for as Chinese companies cut energy deals in North America, see how
China is primed for the U.S. oil market in 2012
For Devon Energy, the shale stake sale to Sinopec will allow the company to consolidate its drilling costs among a diverse portfolio of shale assets. "This arrangement improves Devon's capital efficiency by recovering our land and drilling costs to date and by significantly reducing our future capital commitments," said Devon Chief Executive John Richels in a press release.
$2.3 billion sale of its stake in a Ohio shale venture to French oil giant
earlier on Tuesday gives oil and gas deals a hot start in 2012 after the sector topped M&A activity last year.
Chesapeake Energy's sale of its 25% shale joint-venture stake with
to Total follows previous shale divestitures to foreign oil giants like
Meanwhile, after buying $2.25 billion of Barnett shale assets from Chesapeake Energy in 2010, Total is continuing a U.S. energy push, which includes shale, deepwater and solar energy assets.
Oil and gas was the hottest M&A sector in 2011, with $259 billion in deals -- but that amount reflected a 17% year-over-year drop from 2010, according to
$37.9 billion acquisition of
was the biggest deal of 2011 after a $39 billion wireless merger between
was struck down by antitrust authorities.
Continued energy deals are among some of the boldest M&A predictions for 2012. To read more on M&A to watch for in the next year, see the
5 unexpected deals themes for 2012