* 4th-qtr adjusted profit $1.10/share vs est $1.08
* Plans to use proceeds to repay debt from Eagle Ford asset
* Canadian Natural says to sell or fold acquired royalty
revenue into new vehicle
* Devon shares rise 3 pct premarket
* Capex seen slightly lower at $4.8 bln to $5.2 bln
By Swetha Gopinath and Anna Driver
Feb 19 Devon Energy Corp said on
Wednesday that it would sell some liquids-rich natural gas
assets in Canada to Canadian Natural Resources Ltd for
about $2.8 billion and posted a better-than-expected profit as
it produced more profitable crude oil.
Devon shares were up 3 pct while Canadian Natural's shares
traded in Toronto rose 4.6 percent.
Devon, along with many other U.S. oil and gas producers, has
been selling off its natural gas holdings to focus on more
profitable crude oil assets in North America.
To help achieve that aim, Devon has made some radical
changes, including the $6 billion purchase of oil-producing
properties in the Eagle Ford formation in south Texas in
"We're not investing in gas properties or dry gas properties
at this time," John Richels, Devon's chief executive officer
told investors on a conference call.
Devon said it plans to use proceeds from the asset sale to
repay debt incurred in the Eagle Ford deal.
This year, Devon expects to spend $4.8 billion to $5.2
billon, slightly lower than 2013, drilling wells in places that
produce crude oil like Texas' Permian Basin.
After the deal with Canadian Natural, Devon's only Canadian
assets are its Horn River gas holdings in northern British
Columbia and heavy oil properties in Alberta.
Devon is also looking to sell other non-core natural gas
assets in the United States that produced 144,000 barrels of oil
equivalent per day in the fourth quarter.
The company's oil production rose 17 percent to 177,000
barrels per day in the fourth quarter output from its Permian
Basin wells in Texas grew. This year oil production is forecast
at 198,000 to 216,000 barrels per say, Devon said.
"Our pursuit of oil production resulted in higher revenue
and improved profitability," Richels told investors.
Adjusted profit was $1.10 per diluted share. Analysts on
average had expected $1.08, according to Thomson Reuters
The acquisition is Canadian Natural's largest since 1996,
when it bought Anadarko Petroleum Corp's Canadian unit
for $4.1 billion. It came as a surprise to most because the
Devon assets are natural-gas rich and Canadian Natural has
limited spending on its already substantial suite of gas assets
because of low prices.
But the company said it sees an opportunity to squeeze down
costs on Devon's properties and boost production of valuable
natural-gas liquids and oil.
It also believes that gas prices may strengthen on depleted
U.S. storage levels.
"That helps the metrics of this deal but that's not the
driver," Steve Laut, Canadian Natural's president, said on a
conference call. "It's the assets themselves and the ability to
integrate those assets ... and just develop some light oil
properties and liquids-rich natural gas on these properties that
drive the acquisition."
Adding Devon's 383 million cubic feet per day of gas
production will push Canadian Natural's output of the fuel to
around 1.5 billion cubic feet per day, about the same as Encana
Corp, now the largest producer of gas in Canada.
"It's a good deal for them," said David McColl, an analyst
with Morningstar. Price-wise it's a good deal and asset-wise."
The company said the acquired royalty revenue would either
be folded into a new vehicle to provide steady cash flow to
existing shareholders or be sold off later this year.
Shares of Devon rose $1.93 to $64.84 in midday New York
Stock Exchange trading. Canadian Natural shares were up C$1.83
to C$41.00 on the Toronto Stock Exchange.