BP’s US Lower 48 business has just significantly expanded its onshore footprint by acquiring all of Devon Energy’s assets in the San Juan Basin, which spans northern New Mexico and southern Colorado.
This marks BP’s first move to expand its US onshore shale footprint since separating its US Lower 48 business from the general corporation in early 2015. It is also the first major acquisition by this business in more than seven years.
Most of the acquired assets consist of Devon’s operated interest in the Northeast Blanco Unit (“NEBU”), a section of federal lands located in San Juan and Rio Arriba counties of New Mexico, where BP has had a presence since the 1920s. BP expects taking over operations of the unit’s 480 wells spread across 33,000 gross acres in 1Q16 after receiving required government agency approvals.
Industry veteran David Lawler was named CEO of BP’s US Lower 48 Onshore business in August 2014; Photo Credit: Houston Business Journal
“This acquisition clearly demonstrates the importance of New Mexico and the San Juan Basin to our future,” said David Lawler, chief executive of BP’s U.S. Lower 48 Onshore business. “It’s also consistent with our strategy of selectively expanding in BP’s existing onshore basins, where we can link our innovative well design capability with our extensive subsurface expertise to generate industry leading capital efficiency.”
Friday’s announced acquisition adds to the 550,000 acres and average output of 100,000 boepd that BP has in the San Juan Basin.
Replicating The Independent E&P Model
BP CEO Bob Dudley said at the time of the separation of the US Lower 48 business that it would be more competitive because it would have more rapid decision-making abilities and shorter cycle times from gaining access to drill through to production. In other words, BP’s move to separate the business is akin to trying to replicate the independent E&P model.
At an April presentation in London, Dudley said, “The new business will remain a critical part of BP’s portfolio over the long-term.” He added that the establishment of a “discrete, high quality” unit would give options for the company’s future plans.
Devon Focuses On Its Core
Devon Energy CEO Dave Hager said in a December 7 presentation that the company was commencing its asset divestiture program, consisting of the sale of some of its non-core upstream assets. In a December 10 presentation, the company identified its Carthage, Mississippi Lime, Granite Wash and select Midland Basin assets as possible candidates for divestitures.
Devon expects proceeds derived from these sales to be between $2 and $3 billion. Hager said Devon identified 50,000-80,000 boepd of production from noncore assets to divest throughout next year.
Also earlier this month, Devon announced the acquisition of 80,000 net surface acres in the Anadarko Basin STACK play for $1.9bn from Felix Energy, and the acquisition of 253,000 net acres in the Powder River Basin in Wyoming for $600 million.