Devon Energy Corp (NYSE: DVN) is in discussions to acquire smaller peer Felix Energy LLC for around $2 billion, including debt, according to sources familiar with the matter.
If successful, the deal could mark a thaw for mergers and acquisitions in the U.S. oil patch, which has been roiled by a supply glut. It would also represent a bet by Devon that crude oil prices will recover from their current $40 per barrel lows to around $65 sooner rather than later, the sources said.
The plummeting oil prices have depleted the cash reserves of several U.S. oil and gas companies and have put them under pressure to raise money. The weak market has also weighed on their valuations, making them reluctant to sell themselves.
For Felix, however, a deal would highlight a desire on the part of its majority owner, buyout firm EnCap Investments LP, to return money to its private equity investors in what has been a challenging year for such energy-focused funds.
EnCap has received a cash-and-stock offer for Felix from Devon, the sources said this week. It has also sought other potential buyers, and there is no certainty that any deal will be reached, the sources added.
The sources asked not to be identified because the negotiations are confidential in the Dec. 3 Reuters report.
A representative for Houston-based EnCap declined to comment. Denver-based Felix, and Oklahoma City, Oklahoma-based Devon did not respond to requests for comment.
Devon has oil acreage, as well as an interest in oil and gas pipelines, that are located close to Felix's assets in northern Oklahoma, in an oil-rich area known as Stack. Felix was founded in 2013 with backing from EnCap.
Devon has a market capitalization of nearly $20 billion and operates in multiple areas, including Texas's Permian Basin, the Rocky Mountains and Canada.
Recommended Reading
Five Point Closes Infrastructure Fund with $1.4B in Commitments
2024-09-09 - Five Point Energy, which created newly public Permian Basin company LandBridge, said its Five Point Energy Fund IV was oversubscribed from a target of $1.25 billion.
Raising Capital When Private Equity Has Seen Better Days
2024-10-17 - Oil and gas private equity firms remain active in the market though fundraising hit its peak in 2017.
Post Oak Backs New Permian Team, But PE Faces Uphill Fundraising Battle
2024-10-11 - As private equity begins the process of recycling inventory, likely to be divested from large-scale mergers, executives acknowledged that raising funds has become increasingly difficult.
Silver Hill Closes Fourth Oil, Gas Fund with $1.13B in Commitments
2024-07-31 - Silver Hill’s portfolio consists of operations across 55,000 net acres in East Texas and North Louisiana and 86,000 net acres in North Dakota.
Analyst: Is Jerry Jones Making a Run to Take Comstock Private?
2024-09-20 - After buying more than 13.4 million Comstock shares in August, analysts wonder if Dallas Cowboys owner Jerry Jones might split the tackles and run downhill toward a go-private buyout of the Haynesville Shale gas producer.