Shares of oil and gas company
) moved higher after a media report revealed that Devon is
closing in on a deal to acquire GeoSouthern Energy for about $6
billion. Although Devon's management remained tight lipped
regarding this deal, nearly a 5% increase in the share price to
$62.77 indicates that the market has reacted to the news
CHESAPEAKE ENGY (CHK): Free Stock Analysis
DEVON ENERGY (DVN): Free Stock Analysis
MURPHY OIL (MUR): Free Stock Analysis Report
SANCHEZ ENERGY (SN): Free Stock Analysis
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The Woodlands, Texas-based oil and gas explorer GeoSouthern
Energy primarily operates in the Eagle Ford Shale of South Texas.
The reserve-rich Eagle Ford shale has become a hotspot for
acquisition and merger related activities. Companies like
Murphy Oil Corporation
) have boosted their presence here via acquisitions. In Jun 2013,
Sanchez Energy Corporation
) invested $230.1 million to increase acreage in this shale.
If the above mentioned acquisition finally takes place, it will
further expand Devon's footprint there. Devon is presently
sitting on a pile of cash, exiting the third-quarter 2013 with a
cash balance of $4.32 billion, which might be used to fund the
Devon Energy is currently concentrating on oil and gas
production, which is definitely boosting its performance given
the oil and gas boom in the U.S. now. The strategy to focus on
oil and gas operation has enabled the company to surpass
consensus estimates in the last five quarters.
In June, Devon Energy decided to form a midstream master limited
partnership (MLP). The MLP is expected to initially own a
minority interest in Devon's U.S. midstream business which
includes natural gas gathering and processing assets located in
Texas, Oklahoma and Wyoming.
So, acquiring GeoSouthern Energy, which primarily has upstream
operations, will allow Devon to process the additional production
from the Eagle Ford shale through its midstream MLP assets.
Devon Energy currently carries a Zacks Rank #3 (Hold).