[Editor's note: This story was updated at 11:45 a.m. CST July 31.]

Penn Virginia Corp. (NASDAQ: PVAC) said July 31 it will buy Eagle Ford assets from Devon Energy Corp. (NYSE: DVN) in a deal that increases its core leasehold position in the shale play by 35%.

Penn Virginia agreed to acquire the Eagle Ford assets from Devon for $205 million in cash, or about $2,900 per net acre. The company plans to fund the acquisition with $150 million of committed debt financing and borrowings under its credit facility.

Penn Virginia: Eagle Ford Acquisition Map

Devon said proceeds from the Eagle Ford divestiture combined with other minor asset sales completed across its U.S. operations now total $340 million. The company recently announced a $1 billion divestiture program, including assets in the Barnett Shale.

Penn Virginia’s acquisition includes about 19,600 net acres primarily in Lavaca County, Texas, and about 3,000 barrels of oil equivalent per day (boe/d) of net production, of which 64% is oil. The acreage, which is contiguous to the Penn Virginia’s core operations, includes the opportunity for extended-reach laterals with PV-10 breakeven pricing of less than $30 per barrel, the company said.

Eagle Ford transaction highlights:

  • 42 drilling units (35% of which are currently operated by Penn Virginia) and an average working interest of about 98% and net revenue interest of 76%;
  • De-risked inventory of 91 gross locations (including six in drilling units currently operated by Penn Virginia) targeting the lower Eagle Ford formation;
    • Extended-reach laterals are identified for 43 gross (41 net) locations, including 26 gross (25 net) locations with an average lateral length of 10,000 ft or greater;
  • Net proved developed producing reserves of about 6.3 MMboe, of which about 62% is oil;
    • Total resource potential is estimated at more than 60 million barrels of oil; and
  • Includes infield gathering and compression system with no volume commitments or acreage dedications.

John A. Brooks, Penn Virginia’s interim principal executive officer and COO, said the acquisition will provide the company with “many years of drilling inventory with enhanced economics even in today’s commodity price environment.”

“Our operations team knows this area extremely well as the Devon acreage is contiguous to our existing acreage position,” Brooks said in a statement. “We will utilize our technical capabilities to optimize production and reduce operating and administrative costs per BOE on the acquired assets, while significantly increasing the size and scale of our company.”

In June, Penn Virginia reportedly hired investment bank Jefferies LLC to explore a possible sale, less than a year after emerging from bankruptcy, according to a Reuters report.

Devon’s efforts to monetize its Johnson County, Texas, properties in the Barnett Shale are progressing, according to the company’s press release.

The Johnson County assets represent about 20% of Devon’s Barnett Shale net production and cash flow and could be worth around $600 million, David Tameron, senior analyst for Wells Fargo Securities LLC, said in a July 31 report.

Tameron said Devon's $1 billion noncore divestiture program, which it expects to complete over the next year, should easily cover the company's combined outspend in 2017 and 2018. He anticipates Devon reaching its targeted 20 rigs by year-end 2017, up from 10 in 2016.

“Our recent conversations with management indicate no desire to slow down, and with WTI at $49 per barrel, there is no reason to,” Tameron said. “While this is good for Devon on a standalone basis and will help support its 2018 growth outlook, this will continue to weigh on the macro.”

Penn Virginia said it anticipates the Eagle Ford acquisition will close by Sept. 30, with an effective date of March 1. Gibson, Dunn & Crutcher LLP represented Penn Virginia and RBC Richardson Barr was Devon’s financial adviser on the transaction.

Emily Patsy can be reached at epatsy@hartenergy.com.