Devon Energy becomes fourth largest Williston producer with $5 billion Grayson Mill deal, Enverus reports

Andrew Dittmar, Enverus Intelligence Research July 09, 2024

(WO) – Striking its first big acquisition of the current consolidation cycle, Devon Energy is acquiring EnCap Investments’ Grayson Mill Energy for $5 billion in cash and stock. The deal continues a trend of buyers looking beyond the Permian to find buyable opportunities of scale in an increasingly consolidated market.

Grayson Mill was one the largest remaining private opportunities reasonably likely to come up for sale, with around 500 remaining drilling locations and over 100 Mboed production. Among remaining private equity-sponsored E&Ps, as opposed to truly private companies like Continental Resources, Grayson Mill had the largest count of remaining undeveloped gross drilling locations.

While Devon still had a substantial runway of remaining drilling opportunities, pressure may have been mounting on the company to strike a deal to keep pace with peers that had been rapidly rolling up remaining opportunities.

The deal fits Devon’s generally conservative outlook for M&A, focusing on deals where value is largely supported by current production versus allocating a higher portion of deal value to undeveloped inventory.

In this deal, it appears 70-80% of the total deal value Devon is paying for Grayson Mill is for existing production with the remainder going to undeveloped inventory. That was also the case in its prior acquisitions of RimRock in the Williston and Validus in the Eagle Ford.

However, a more conservative outlook on deals may have prevented Devon from coming out on top in the various scrambles for core Permian opportunities. This deal makes the Williston a key operating region for Devon, where they might otherwise have been a seller if they couldn’t find a scalable opportunity to increase their footprint.

The deal vaults Devon the 10th largest producer in the Williston based on gross operated production to fourth, when also accounting for the combination of ConocoPhillips and Marathon Oil which will be third behind Chord Energy and Continental.

Chord now finds itself in an interesting position. Grayson was a natural target for Chord with closely fitting operations. Now that Devon has committed to the basin, Chord could find itself the next acquisition target in another of the public-public company mergers that have largely dominated M&A activity.

The company could also go after other smaller opportunities in the Williston like Kraken Resources, or potential non-core sales from companies like Exxon and Chevron, pending closing the Hess deal.

It could also decide to branch out into another basin as SM did when it entered the Uinta basin last month. The Eagle Ford and MidContinent now stand out as some of the least consolidated plays, with the most remaining private opportunities including names like Camino and Citizen in the MidContinent and Verdun and WildFire in the Eagle Ford.


Andrew Dittmar is principal analyst at Enverus Intelligence Research.

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