CHICAGO, May 30 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) has
placed ratings of Devon Energy on Rating Watch--Up. DCR currently rates Devon
Energy's senior unsecured debt at 'BBB' (Triple-B) and its Trust Convertible
Preferred Securities at 'BB+' (Double-B-Plus). The rating action follows the
announcement that Devon Energy has agreed to merge with Santa Fe Snyder Energy
in a stock-for-stock merger, forming a company that will rank in the top five
of all U.S.-based independents in terms of reserves and production.
The company will continue to be named Devon Energy Corporation and will
remain headquartered in Oklahoma City. It will have a proved reserve base of
approximately 1.1 billion boe, which is split 53 percent liquids and 47
percent gas. These reserves are predominantly located in North America. Net
combined annual production of approximately 125 million barrels of oil
equivalent is weighted more toward oil (43 percent) than gas (57 percent).
The merger will provide considerable operating synergies since both Devon
and Santa Fe Snyder have significant operations in the Permian Basin and Rocky
Mountains. In addition, Santa Fe Snyder will give Devon a larger portfolio of
international assets that should fuel production growth for the combined firm
going forward. Although Devon will assume approximately $1.0 billion in debt
from Santa Fe Snyder, it should be able to quickly reduce the higher debt
levels with expected strong free cash flow. In the near term, interest
coverage, as measured by EBITDA/interest should remain above 7.0X and total
debt/EBITDA should range between 1.0 to 1.5X.
Under the terms of the agreement, Santa Fe Snyder shareholders will
receive 0.22 of one share of Devon common stock for each Santa Fe Snyder
common share. As a result, Santa Fe Snyder shareholders will own
approximately 32 percent of the combined company and Devon shareholders will
own approximately 68 percent. The merger is subject to shareholder approval
as well as other customary closing and regulatory conditions. Completion of
the transaction is expected late in the third quarter or early in the fourth
quarter.
SOURCE Duff & Phelps Credit Rating Co.
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http://www.dcrco.com
CONTACT:
Sean T. Sexton, 312-368-3130,
sexton@dcrco.com, or Randall P. Biang, 312-606-2342,
biang@dcrco.com, both of DCR
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