WSJ: Devon Nears Deal To Buy GeoSouthern Energy For $6 Bln

(RTTNews) - Oil and gas producer Devon Energy Corp. (DVN) is nearing a deal to buy privately-held Texas shale oil driller GeoSouthern Energy Corp. for about $6 billion, the Wall Street Journal reported Tuesday, citing people familiar with the matter. The acquisition could reportedly be announced as soon as Wednesday and would be the largest U.S. oil and gas transaction this year.

The acquisition of Woodlands, Texas-based GeoSouthern is expected to help bolster Devon's position in the Eagle Ford shale formation in South Texas. GeoSouthern reportedly produces about 50,000 barrels of oil equivalent a day.

According to the WSJ report, GeoSouthern was one of the first companies in the region and has focused on the Black Hawk field. One of GeoSouthern's investors is the Blackstone Group, L.P.(BX), which helped the company secure $1 billion in financing in February 2012 to develop its holdings in Black Hawk.

Oklahoma-based Devon was co-founded in 1971 by Chairman Larry Nichols and went public in 1988. The company helped create the U.S. shale boom when it acquired Mitchell Energy & Development Corp. for about $3.5 billion in 2002. Mitchell was the first company to successfully use hydraulic fracturing, or fracking, to break open dense shale formations.

According to the WSJ report, Devon was the first company to introduce horizontal drilling - building a well that heads straight down, then gradually turns and runs through a wedge of shale, opening up more of the rock.

Devon, which has a market capitalization of more than $25 billion, has focused onshore in the U.S. and Canada. The company has nearly doubled its onshore North American oil production since 2008 and produces about 2.6 billion cubic feet of natural gas a day, representing more than 3 percent of all the gas consumed in North America.

In late October, Devon and Crosstex Energy Inc. (XTXI) agreed Monday to substantially combine all of their midstream businesses in the U.S. to form a new midstream business that will be named prior to closure of the deal.

That deal will see the combination of Devon's large Texas and Oklahoma midstream platform with Crosstex's positions in the Barnett Shale, Permian Basin, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus. Devon, with its strong upstream development portfolio, will be the new company's largest customer.

DVN closed Tuesday's regular trading session at $62.77, up $2.98 or 4.98 percent on a volume of 11.44 million shares. However, in after-hours, the stock declined $0.09 or 0.14 percent to $62.68.