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Penn Virginia Closes Devon Eagle Ford Deal, Eyes Extended Reach Laterals
Penn Virginia Corp. reported Tuesday that it has completed its acquisition of Eagle Ford Shale assets located primarily in Lavaca County, TX from Devon Energy Corp. for $205 million in cash.
The Devon sale is part of its ongoing plan to complete $1 billion in divestitures by next year, while Penn Virginia said the acquired acreage carries “significant upside potential” in the Eagle Ford and Austin Chalk formations of Texas, which should allow it to increase production by about 30%.
Houston-based Penn Virginia said the transaction adds roughly 19,600 net acres contiguous to its core operations and boosts production by about 3,000 boe/d net (64% weighted to oil).
“Our operations team knows this area very well as the Devon acreage is contiguous to our existing acreage position and we have identified a significant number of locations for drilling extended reach laterals with superior economics,” said CEO John A. Brooks.
In connection with the acquisition, Penn Virginia has obtained a $200 million second lien term loan with an initial London Interbank Offered Rate, or Libor, for a three-month interest period plus 7.00% that matures in September 2022. The company is using the net proceeds from the term loan and additional borrowings to finance the Devon acquisition and related expenses.
The company also said the borrowing base under its revolving credit facility was increased from $200 million to about $238 million in connection with the Devon acquisition and the fall borrowing base redetermination.
“Because of the high quality of this asset, the company upsized the second lien term loan by $50 million and we received a significant increase to our borrowing base under our revolving credit facility,” said Brooks. “We strongly believe this acquisition is an ideal fit and will play a key role in our long-term growth strategy for Penn Virginia.”
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