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Devon heads for exit, joins flight from Canada by foreign firms
Gary Park for Petroleum News
The exodus by foreign-based companies who have spent decades in Alberta’s oil patch has moved into high gear with word from Devon Energy that it is open to offers for its oil sands and heavy crude operations.
Carrying an estimated value of up to C$5 billion, the assets include 121,000 barrels per day of production, largely from the Jackfish thermal oil sands project and a smaller heavy oil venture.
In addition, the Oklahoma-based firm is seeking buyers for its natural gas unit in the Barnett Shale of Texas.
Devon’s decision to exit from Canada comes after years of failure by governments to approve new pipelines out of Alberta and gain access to world oil prices in Asia.
It follows an unloading of oil sands assets by Royal Dutch Shell, Norway’s Equinor (formerly Statoil), ConocoPhillips, Murphy Oil and Marathon Oil. Spain’s Repsol is expected to be next in line.
Michael Dunn, an analyst with GMP FirstEnergy, said the flight from Canada is proof that foreign players are certain they can generate cash more quickly and for less capital investment by “adjusting their strategies.”
He said Texas is “beating Alberta on field-level economics and on egress. The flavour of the day is definitely not the oil sands.”
Dwindling appeal The proof of Alberta’s dwindling appeal occurred in January when MEG Energy spurned a hostile takeover bid by Husky Energy for C$6.4 billion, certain it could attract a better price.
As a result, the Beijing-controlled company, which is producing 100,000 bpd from its Christina Lake oil sands operation, is now left feeling unwanted.
Dave Hager, Devon’s chief executive officer, said that if his firm can close a deal it will transform into a purely U.S. oil and gas producer, concentrating on shale assets such as Eagle Ford in Texas and Stack in Oklahoma.
But he was adamant that Devon will “not give (the Alberta) asset away,” saying such offerings “don’t come to market every day.”
Analysts believe four of the largest oil sands producers - Husky, Suncor Energy, Imperial Oil and Canadian Natural Resources - will likely do a detailed assessment of Jackfish and the heavy oil operations in east-central Alberta. Because of its focus on reducing a large debt load, Cenovus Energy is thought to be out of the running.
However, most experts are cautious about the chances of a deal being done.
Devon, which has 750 employees, 400 of them in Calgary, started its pullback from Canada in 2014 when it sold natural gas operations in Western Canada to Canadian Natural for C$3.1 billion, then two years later sold its 50 percent stake in the Access oil sands pipeline to Wolf Midstream for C$1.4 billion.
- GARY PARK
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