BP eyes Devon's Eagle Ford shale unit; the reported $3.5 billion to $4 billion price is about $52,000 a flowing barrel

BP is looking at buying Devon Energy's Eagle Ford operations in South Texas, Reuters reported Thursday, citing sources. BP has entered the data room for the asset, which Devon opened in late August. The sources put its value between $3.5 billion and roughly $4 billion. Analysts at TPH, the energy arm of Perella Weinberg Partners, marked it at about $4.5 billion in a note on Wednesday.

The sources also told Reuters that entering a data room "does not guarantee that BP will buy, or even formally bid on" the asset. BP declined to comment and Devon did not respond, according to Reuters.

Devon shares were up 1.4% at $48.71 shortly before the close, according to Nasdaq data. BP's U.S.-listed shares were down 0.3% at $44.36.

What the price works out to

Reuters says Devon's Eagle Ford position covers about 90,000 net acres and produced about 77,000 barrels of oil equivalent a day (boepd) in the second quarter. Shale deals are usually compared on price per flowing barrel, so we did that arithmetic:

The gap between the sources' range and the TPH mark is roughly $6,500 to $13,000 a flowing barrel. That is the negotiating room a buyer and seller have to close at a time when oil prices have been swinging hard on the Iran conflict.

Why it fits BP

BP's U.S. shale arm, BPX Energy, produced about 545,000 boepd in the second quarter, including about 205,000 boepd from its existing Eagle Ford acreage, Reuters said. BPX is targeting more than 650,000 boepd by 2030.

• Company-wide: adding 77,000 boepd would lift BPX to about 622,000 boepd, a 14% gain and about 96% of the 2030 goal in a single deal.
• In the Eagle Ford: BPX's output in the basin would rise from about 205,000 to about 282,000 boepd, up roughly 38%. Buying next door to existing operations is where a buyer usually finds cost savings on crews, pipes and gathering.
• For BP's balance sheet: $4 billion is about 3.4% of BP's $116 billion market value on Nasdaq's figures.

Reuters said BP, under chief executive Meg O'Neill, who joined in April, has been looking at a small number of mostly oil-producing shale assets valued at $2 billion to $5 billion, part of a return to a strategy centered on oil and gas after years of prioritizing renewables.

What it means for Devon

Devon is marketing both its Eagle Ford and its Powder River Basin acreage in Wyoming, Reuters reported, after its merger with Coterra Energy. A $3.5 billion to $4 billion sale would equal about 6.5% to 7.5% of Devon's $53.6 billion market value.

The timing matters because Devon is under pressure from activist investors Toms Capital and Kimmeridge. As we reported Wednesday, Toms wants Devon to consider selling the whole company, while Kimmeridge has pushed for a slimmer portfolio. Selling the Eagle Ford piece by piece is the Kimmeridge version of that argument. A clean sale at a good price would give Devon an answer for both camps. A weak price would do the opposite.

Traders will watch for formal bids, whether other buyers are in the data room, and any update from Devon on the Powder River sale. Oil prices are on our crude oil chart.

Sources: Reuters (via AOL); Nasdaq. Per-barrel and percentage figures are Chronicle calculations from the reported numbers and are approximate. This is market information, not investment advice.