As first reported by Reuters, Devon Energy (DVN.N) announced on Monday that it has reached an agreement to acquire Grayson Mill Energy's Williston Basin business, owned by private equity firm EnCap, in a cash-and-stock deal valued at $5 billion. This move aims to capitalize on high stock valuations to expand Devon's acreage.

The acquisition cost comprises $3.25 billion in cash and $1.75 billion in stock, which will bolster Devon's "multi-basin business," according to company executives during a conference call.

Shares of Devon Energy fell by 1.7% in early trading amid a declining crude price environment. The U.S. energy sector has seen a wave of consolidation, amounting to $250 billion in deals in 2023, with companies looking to invest their capital and increase their reserves. This trend has benefited private equity firms like EnCap, which sold some shale assets of XCL Resources for about $2 billion in June.

In January, Reuters reported EnCap's plan to sell Grayson Mill, a major Bakken-focused energy producer operating in North Dakota, Montana, and Wyoming's Powder River Basin. The deal is expected to close by the end of the third quarter, adding up to 10 years of inventory life with 500 additional wells, primarily in the Bakken, and contributing 307,000 net acres to Devon's Williston Basin holdings.

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Devon Energy anticipates its production will rise from 664,000 barrels of oil equivalent per day (boepd) to 765,000 boepd.

Neal Dingmann, an analyst at Truist Securities, noted that while the deal's cost is relatively high, the three-rig Bakken plan and midstream additions should enhance shareholder returns, primarily through stock buybacks. Devon's board of directors plans to increase its share repurchase program by 67% to $5 billion through mid-2026. The acquisition is also expected to boost the company's dividend payouts, starting in 2025.

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