Devon Energy near $6 billion deal for GeoSouthern: source

NEW YORK Tue Nov 19, 2013 4:31pm EST

A pump jack which produces oil from the Permian Basin in Artesia, New Mexico, is seen in this undated handout photo provided by Devon. REUTERS/Devon Energy/Handout

A pump jack which produces oil from the Permian Basin in Artesia, New Mexico, is seen in this undated handout photo provided by Devon.

Credit: Reuters/Devon Energy/Handout

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NEW YORK (Reuters) - Devon Energy Corp is close to a deal to buy privately held GeoSouthern Energy Corp for around $6 billion, according to a person familiar with the matter.

The deal could be announced as soon as this week, the source said. The source could not be identified because the talks are private.

GeoSouthern Energy, based in The Woodlands, Texas, drills for oil and gas in the Austin Chalk and Eagle Ford geologic formations in South Texas.

A deal to buy GeoSouthern would be Devon's second large transaction in less than a month as the Oklahoma City, Oklahoma-based company seeks to revive stock market investor interest in its shares.

Devon has been working for years to transform itself. In 2009, the company started selling off international and offshore assets in order to focus on its North American operations.

In October, the company agreed to combine most of its U.S. pipeline and processing businesses with those owned by Crosstex Energy Inc and Crosstex Energy LP and form a new infrastructure company.

"If there is one criticism of the company, it's that they don't have exposure to some of the fastest growing unconventional plays like the Eagle Ford in Texas or the Utica in Ohio," said Mark Hanson, oil company analyst with Morningstar in Chicago.

The GeoSouthern purchase could make up for some of those shortcomings. Still, Hanson said that the large purchase could be "a tacit admission your organic growth strategy didn't work."

Devon declined to comment. GeoSouthern was not immediately available for comment.

The deal was originally reported in the Wall Street Journal. Devon shares rose 5.5 percent to $63.04 on Tuesday afternoon on the news.

(Reporting by Greg Roumeliotis and Michael Erman; Additional reporting by Anna Driver in Houston; Editing by Bernard Orr and Nick Zieminski)

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Comments (1)
Numb3rTech wrote:
Devon is a good company. I have worked as a contractor for them.

Nov 19, 2013 5:12pm EST  --  Report as abuse
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