Updates
Later, 7:04 a.m. CT: now, over at SeekingAlpha, Richard Zeits suggests Devon may have paid $60,000/acre. If so, the Bakken is way, way undervalued.
Original Post
Devon Energy Corp. DVN -0.03% said its $6 billion purchase of a big stake in Texas' Eagle Ford Shale is only the first step in a move from its natural-gas roots to become a fast-growing oil company.
The purchase of GeoSouthern Energy Corp.'s existing wells and 82,000 acres for future drilling will increase Devon's overall output 9% next year and add 20% to earnings per share, Devon said Wednesday.
The Oklahoma City company will sell what it considers to be its noncore businesses throughout the U.S. and Canada, including 30% of its natural-gas output.
Investors will "find that the new Devon is a significant North American oil producer capable of delivering high rates of growth in high-margin oil production while generating free cash flow," Chief Executive John Richels said in a conference call.
Devon's shares fell two cents to close at $62.75 Wednesday on the New York Stock Exchange after the acquisition was announced.
The stock jumped 5% Tuesday after The Wall Street Journal reported that the deal was in the works. Analysts said the deal price seemed high. International Strategy and Investment Group LLC calculated the cost of the undrilled sites at about $34,000 an acre, while previous high-water marks for Eagle Ford acreage were closer to $25,000.Compare with Bakken acreage here.
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