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Devon's Deepwater Partners Push Maersk Out

Devon Energy Corp. confirmed last week that Maersk Oil's plan to buy the Oklahoma City-based producer's stakes in promising deepwater Gulf of Mexico (GOM) discoveries was blocked after some of the other lease owners used their preferential purchase rights.

Devon spokesman Chip Minty told NGI that because of confidentiality agreements he could not provide specific details, but he said initial reports about the scuttled transaction were true. Maersk in December agreed to pay Devon $1.3 billion for interests in three deepwater projects in the Lower Tertiary Trend: Cascade, Jack and St. Malo (see NGI, Jan. 4). Maersk also negotiated to make up to $4 billion in additional investments in the GOM projects over time.

However, Devon's partners in the Cascade and St. Malo discoveries exercised their option to purchase Devon's stake, Minty said. Devon apparently would receive about the same amount from the partners for the interests in the projects that it would have received from Maersk. Devon's estimated share of recoverable resources from the three fields combined is more than 200 million boe.

Devon's half-interest in the Cascade deepwater project is to be bought by 50% owner Petroleo Brasilerio (Petrobras) of Brazil, which operates the block. Cascade is scheduled to begin operations this year. The sale also was to include a quarter-interest in the Chevron Corp.-operated Jack and St. Malo projects, which are both scheduled to begin production in 2014. Eni SpA, ExxonMobil Corp., Statoil ASA and Petrobras also own stakes in the St. Malo discovery.

Chevron CEO John Watson said Friday the company would exercise its rights to take over Devon's interest in the St. Malo project, but not increase its position in the Jack prospect.

"We exercised our preemptive right, and we aligning our equity interests in those two opportunities," Watson said of St. Malo and Jack. "I won't say a lot about the commercial aspects of those prospects, which are confidential, but we said 'yes' on St. Malo, 'no' on Jack."

Minty said Devon continues to negotiate with Maersk about the Jack prospect and other assets in the GOM.

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