(Adds background, details about GeoSouthern CEO, updates stockprice)
By Michael Erman
Nov 20 (Reuters) - Devon Energy Corp will buyoil-producing assets in Texas for $6 billion and plans to sellor otherwise monetize some of its natural gas-heavy holdings inresponse to investor criticism about its lack of exposure tomore profitable crude.
The Oklahoma City-based company said it will buy privatelyheld GeoSouthern Energy Corp's core assets in the Eagle Fordshale region of south Texas for $6 billion in cash, as it seeksto revive investor interest in its shares.
Oil and gas deals have been slow in the United States in2013, compared to previous years when companies like Exxon Mobil, Royal Dutch Shell and BHP Billiton Ltd poured billions into emerging shale assets.
Investors had worried that Devon did not have a position insome of the hottest U.S. shale formations, like the Eagle Ford.
Devon Chief Executive John Richels said after theGeoSouthern deal was announced that Devon was looking to sell orotherwise extract value from its conventional natural gas assetsin Canada and other non-core assets in the U.S.
"The new Devon is a significant North American oil producercapable of delivering high rates of growth in high-margin oilproduction while generating free cash flow," Richels said on aconference call with investors.
Shares of Devon Energy were barely lower in Wednesdayafternoon trading, down five cents to $62.72.
The company said the assets it was buying currently produce53,000 barrels of oil equivalent (BOE) per day over 82,000 netacres.
That's expected to grow at a compound annual rate of 25percent over the next several years, reaching peak production ofabout 140,000 BOE per day, the company said. The GeoSouthernassets hold estimated risked recoverable resources of 400million barrels of oil equivalent, most of which is provedreserves, it said.
Private equity firm Blackstone Group, an investor inGeoSouthern, will sell its stake through the Devon deal, rakingin about $1.54 billion, Blackstone said.
GeoSouthern CEO George Bishop also holds an ownership stakein the company, but it is not currently known how much he willmake from the sale.
TRANSFORMATION
Devon has been working for years to transform itself. In2009, the company started selling international and offshoreassets to focus on its North American operations.
That strategy left the company with a big exposure tolower-priced natural gas and natural gas liquids, causing thecompany's shares to underperform over the past two years.
Richels said that after exiting the non-core assets, Devonwould focus on five key areas - the Eagle Ford shale, thePermian basin, Canadian heavy oil, the Barnett Shale, and theAnadarko basin - as well as two other emerging oil plays.
Through the asset monetization program, the company hopes toexit assets holding around 30 percent of Devon's natural gas, 12percent of its natural gas liquids and 8 percent of its oil.
Through the GeoSouthern deal, Richels said the company wasbuying light-oil rich acreage in the best part of the Eagle Fordformation at a discount to the stock market valuation of similarassets.
"The deal makes them more of an oil company and grows theirproduction right away. A lot of people still have the idea thatthey are too much of a gas company and this deal will changethat right away," said Mike Breard, an analyst at Hodges CapitalManagement in Dallas.
Morgan Stanley and Goldman Sachs were financial advisors toDevon in the GeoSouthern deal. Jefferies & Co advisedGeoSouthern.
Last month, Devon agreed to combine most of its U.S.pipeline and processing businesses with those owned by CrosstexEnergy Inc and Crosstex Energy LP and form anew infrastructure company. (Additional reporting by Anna Driver in Houston; Editing byNick Zieminski, Bernadette Baum and Tim Dobbyn)
