(Reuters) - Oil and gas producer Devon Energy Corp (DVN.N) said on Wednesday it would sell its stakes in pipeline operator EnLink Midstream for $3.13 billion to pare debt and focus on its core shale business as crude prices hover near four-year highs.
The company’s shares rose more than 6 percent to $41.85 in early afternoon trade as the company also boosted its share buyback program to $4 billion from $1 billion.
Devon leads a pack of oil producers that are looking to drill beyond the Permian basin in Texas and eyeing little known Oklahoma-based shale producing areas of SCOOP and STACK to boost production.
Devon said in March it was looking at asset sales of up to $5 billion, as the industry comes under pressure from Wall Street to look for more ways to boost shareholder returns.
“The EnLink proceeds, combined with proceeds from the non-core E&P assets already sold and those currently being marketed, will exceed our $5 billion divestiture target,” Chief Executive Officer Dave Hager said in statement.
Like other oil and gas producers, Devon is trying to simplify its asset portfolio, cut costs and at the same time return cash to shareholders.
“The midstream monetization may have come sooner than anticipated as some were expecting sale of Canada or the Eagle Ford,” said Cowen & Co analyst Kathy Yang. “We would not rule out further portfolio optimization as focus is on Delaware & STACK core assets.”
Tudor Pickering & Co analyst Jamaal Dardar said investors are expecting Devon to sell another $3 billion in assets, including in the Eagle Ford basin in Texas.
Devon plans to sell its stakes in EnLink Midstream Partners LP (ENLK.N) and EnLink Midstream LLC (ENLC.N) to an affiliate of Global Infrastructure Partners. The new buyback is conditional on closing the EnLink deal, which the company expects by July, it said in a statement.
Devon said the sale will reduce debt by 40 percent. The company’s total long-term debt at the end of 2017 was $10.29 billion, according to the company’s latest annual filing.
In April, the company cut around 300 jobs, roughly 9 percent of its staff to reduce costs and save $150 million to $200 million by 2020.
Reporting by Laharee Chatterjee and Akshara P in Bengaluru; Editing by Bernard Orr and Saumyadeb Chakrabarty