The business to be divested, called Devon Canada, owns heavy oil assets that are mainly located in Alberta

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Image: Canadian Natural to acquire the Canadian business of Devon Energy. Photo: courtesy of Monika Wrangel/Pixabay.

US oil and gas company Devon Energy has announced its exit from Canada by divesting its operations in the country to Canadian Natural Resources for $2.8bn (£2.22bn).

The business to be divested, called Devon Canada, owns heavy oil assets that are mainly located in Alberta. The assets’ net production averaged 113,000 oil-equivalent barrels in the first quarter of 2019.

At year-end 2018, proved reserves associated with Devon Canada’s assets totalled nearly 409 million barrels of oil.

Why Devon Energy is selling its Canadian business

Devon Energy will use the proceeds from the transaction to reduce its debt. The company said that in order to become a high-return US oil growth business it will continue to advance the sale process for its Barnett Shale gas assets in north Texas with a target to wrap it up by the end of this year.

Devon Energy president and CEO Dave Hager said: “The sale of Canada is an important step in executing Devon’s transformation to a U.S. oil growth business.

“This transaction creates value for our shareholders by achieving a clean and timely exit from Canada, while accelerating efforts to focus exclusively on our high-return U.S. oil portfolio.”

For Canadian Natural, the assets to be acquired, which are contained in Western Canada, are within its core areas. The asset base comprises 100% operated long life low decline thermal in situ production and also 95% operated conventional primary heavy crude oil production, which are both in proximity to existing assets of Canadian Natural.

Also included in the divested portfolio are 1.5 million acres of land, out of which, 1.0 million acres are undeveloped and are said to have significant upside value and opportunities.

Canadian Natural president Tim McKay said: “The assets provide us the opportunity to add value through synergies, including facility consolidation and operating and marketing efficiency opportunities, with targeted benefits of C$135 million on an annualized basis.

“Through economies of scale, as well as complementary research and development efforts, we target to leverage technology advancements across the combined portfolio to drive continuous improvement, cost reductions and production optimization.”

Closing of the transaction will be based on satisfying customary closing conditions and receipt of regulatory approvals.