Devon Nabs Williston Acreage in Grayson Acquisition

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Oklahoma-based Devon Energy (NYSE:DVN) (Oklahoma City) announced it closed on a $5 billion deal to acquire Grayson Mill Energy (Houston, Texas), taking on some 300,000 net acres in the Williston Basin in the process.

Devon announced plans for the merger in July. In its announcement on closing on Friday, the company said it would secure 307,000 net acres and 500 undrilled locations in the Williston Basin from Grayson.

Grayson formed in 2016 with a strategic focus on returning capital to its investors, building up a considerable portfolio in the Rocky Mountains and a particular focus on the Williston basin in the Dakotas.

As of Friday, the government of North Dakota showed Grayson was running two of the 37 active rigs across the state.

The broader Williston area, part of the Bakken and Three Forks formations, is among the largest inland shale oil producers in the continental United States.

North Dakota set a record of 1.5 million barrels of production per day (BBL/d) in November 2019. Federal data, meanwhile, show the Bakken formation averaged 1.26 million BBL/d during the three-month period ending June 30.

Drillers, meanwhile, are becoming more efficient, boosting production with limited rigs by using miles-long laterals and multi-bore wells. Devon during the second quarter said it recorded an average lateral length of 9,300 feet.

The U.S. Geological Survey said it believes the broader basin holds an estimated, undiscovered reserve potential of 4.3 billion barrels of oil and 4.9 trillion cubic feet of associated natural gas.

North Dakota oil production accounts for about 10% of the total output from the seven primary inland shale basins, which is expected to average 11.01 million BBL/d this year and 11.4 million BBL/d in 2025.

"This strategic transaction is an excellent fit for Devon, enabling us to efficiently expand our operating scale and production," Devon President and Chief Executive Officer Rick Muncrief said.

The Energy Information Administration, the statistical arm of the U.S. Department of Energy, finds North Dakota crude oil production should average 1.28 million BBL/d in 2024 and 1.32 million BBL/d in 2025, not too far away from current levels.

In announcing the deal in July, Devon said it would maintain a production level of around 100,000 barrels of oil equivalent per day (BOE/d) from the assets acquired from Grayson. About 55% of that is in oil.

Devon during the second quarter produced 335,000 barrels of oil per day (BBL/d) on average, 3% higher than expected for an all-time high.

The company said it expects to spend about $900 million during the third quarter, when oil production should average between 319,000 and 325,000 BBL/d.

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