By David French
(Reuters) -U.S. oil and fuel producer Devon Vitality has approached Enerplus, a peer with a market worth of C$4 billion ($3 billion), with an acquisition supply, individuals aware of the matter mentioned on Thursday.
Such a mixture would proceed the dealmaking spree seen within the North American oil patch in latest months, which has included a lot of Devon’s rivals — together with Exxon Mobil, Chevron and Occidental Petroleum — making main acquisitions.
There isn’t any certainty that Devon and Enerplus will negotiate a deal, the sources mentioned, requesting anonymity as a result of the matter is confidential. Devon’s proposed acquisition phrases couldn’t be discovered.
Devon declined remark. Enerplus didn’t instantly reply to a request for a remark.
Enerplus shares rose 7% to C$20.64 on the information in morning buying and selling on Thursday. Devon Vitality shares rose 2% to $42.08.
The hunt for higher reserves and economies of scale has fueled consolidation within the U.S. oil and fuel sector over the course of the previous yr. Exxon agreed to pay $59.5 billion for Pioneer Pure Assets and $4.9 billion for Denbury. Chevron inked a $53 billion deal for Hess and acquired PDC Vitality for $6.2 billion. Occidental clinched a $12 billion deal for CrownRock.
Enerplus operates primarily within the Bakken Basin in North Dakota, and likewise has a footprint within the Marcellus shale area in Pennsylvania. Have been a deal to materialize, it will complement Devon’s present presence in North Dakota and cut back its reliance on the Delaware Basin in Texas and New Mexico.
Headquartered in Calgary, Enerplus offered its Canadian belongings to Journey Vitality and Surge Vitality in 2022 to deal with its extra profitable U.S. acreage.
The guess has paid off, producing robust money circulation and permitting Enerplus to return $307 million to shareholders in 2023. The corporate has mentioned it expects to return roughly 70% of its free money circulation to shareholders by share buybacks and dividends in 2024.
Enerplus shares have underperformed a lot of these of its friends, nonetheless, as traders fret in regards to the firm spending extra to generate the identical ranges of manufacturing. Its capital spending totaled $532 million in 2023, up from $432 million in 2022.
Previous to information of the potential take care of Devon, Enerplus shares had dropped 18% within the final 12 months, in comparison with a 6% drop within the S&P 500 Vitality Index.
Devon’s shares have carried out even worse, down 34% within the final 12 months. The Oklahoma Metropolis-based firm, which has a market worth of $26 billion, has additionally been grappling with excessive manufacturing prices and has struggled to fulfill its efficiency objectives.
(Reporting by David French in New York; Enhancing by Mark Porter)
