In the midst of remodeling, American Energy—Woodford LLC has scored a new addition to its core of more than 200,000 net acres.

The subsidiary of American Energy Partners LP (AEP), which was founded by the late Aubrey McClendon, is one step closer to becoming a stand-alone company following its name change to White Star Petroleum LLC.

Along with the new name, the company said April 20 it has entered a definitive agreement with Devon Energy Corp. (NYSE: DVN) to acquire its noncore assets for $200 million. The deal is expected to be a win-win for the two companies, both based in Oklahoma City.

For Devon, the sale edges the company toward its nearly $3 billion divestiture goal for the year. Meanwhile, the acquisition is set to double White Star's production and acreage footprint in the Central Northern Oklahoma (CNOW) Play.

The acquired assets include about 210,000 largely contiguous net acres, mostly HBP, and 555 operated and nonoperated Mississippi Lime and Woodford Shale horizontal wells.

The acreage, primarily located in Oklahoma’s Payne, Lincoln, Logan and Garfield counties, immediately offsets White Star's more than 200,000 net acres in the CNOW Play.

In first-quarter 2016, net production from the acquired assets averaged 12,800 barrels of oil equivalent per day (boe/d). Field-level cash flow accompanying the assets, which excludes overhead costs, totaled $8 million in the first quarter.

As of year-end 2015, the properties had proved reserves of 11 MMboe, the release said.

As part of the transaction, White Star executed hedges covering a substantial portion of acquired PDP production. The move will provide stability to the company's cash flows while preserving upside, said Elliot J. Chambers, White Star’s CEO and CFO, in a statement.

In February, Chambers was appointed as CEO, in addition to his role as CFO, as a “critical step” of its separation from AEP, according to the release. Joseph D. Craig was also promoted to COO from his previous role as vice president of operations.

White Star is sponsored by The Energy and Minerals Group. The company said in a press release that it expects to complete its transition as fully independent of the AEP platform during the second quarter of 2016.

“This separation has been a strategic objective of our business since the company was founded in 2013, and we look forward to bringing it to fruition as quickly as possible during the second quarter,” Chambers said.

The transaction is subject to customary terms and conditions. The sale will have an effective date of Jan. 1.

Jefferies LLC was lead financial adviser to Devon on the transaction. RBC Richardson Barr was also a financial adviser to Devon. Vinson & Elkins LLP was Devon’s legal adviser. White Star’s legal adviser for the transaction was Porter Hedges LLP.

Devon’s Rebalancing Act

Dave Hager, Devon’s president and CEO, said the sale to White Star is “another important step” in the company’s planned noncore asset sales.

Following its $2.5 billion acquisition in the Anadarko and Powder River basins in December, Devon planned to prune its portfolio.

The company aimed for asset sales between $2 billion and $3 billion, starting with its 50% stake in the Access Pipeline, a heavy oil transportation pipeline network serving northeastern Alberta, Canada.

Devon expects to make an announcement about its sale of the Access Pipeline in the first half of 2016. The midstream divestiture is expected to command a $900 million to $1 billion asking price, Tudor, Pickering, Holt & Co. said in a February report.

Devon’s upstream divestitures will include up to 80 Mboe/d of production from properties in the Midland Basin, East Texas and Midcontinent regions. Key targets include:

  • 15,000 net undeveloped acres in Martin County, Texas;
  • Southern Midland Wolfcamp;
  • Carthage Field in Panola County, Texas; and
  • Granite Wash.

Data rooms for upstream assets have been open since early March and bids are expected in the second quarter, according to the company.

Emily Moser can be reached at emoser@hartenergy.com.

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