HOUSTON (AP) _ Devon Energy Corp. is buying rival Ocean Energy Corp. for $3.5 billion in stock in a deal that will create the largest U.S.-based independent oil and gas exploration and production company.
The combined companies, which will be based in Oklahoma City, will have production of about 2.4 billion cubic feet of natural gas and 250,000 barrels of oil and natural gas liquids per day.
Under the deal announced Monday, Oklahoma City-based Devon will issue 0.414 shares of common stock for each share of stock held by Ocean shareholders. Based on Devon's closing stock price Friday of $48.23 per share, that would value Ocean shares at $19.97 a share, or a slim 2.6 percent premium over Ocean's closing price of $19.27 on Friday.
In addition, Devon will assume $1.8 billion of Houston-based Ocean's debt and other obligations.
The transaction is subject to shareholder and regulatory approvals, but the Devon statement said the company expects to complete the transaction by the spring or summer.
``We're looking for ways to enhance our strengths and to solve our weaknesses,'' Devon chairman and chief executive J. Larry Nichols said. ``We think this transaction does that in really quite an outstanding way.''
Devon brings a strong portfolio of North American onshore reserves and healthy cash flow, Nichols said, while Ocean brings a broader offshore presence and a balance sheet that will lower the combined company's debt ratio.
The combined company expects to save at least $50 million annually by reducing costs, including the elimination of Ocean's headquarters and an undetermined number of layoffs. The savings could be as high as $100 million, officials said.
Despite the move to Oklahoma City, Nichols said the company will retain a major presence in Houston as well as Calgary in Canada.
Ocean chairman, president and chief executive James T. Hackett said combining the two companies ``creates a balanced portfolio with North American and international assets, increased oil and gas production capabilities and greater internal growth opportunities through an active exploration program.''
Nichols will retain the chairman's and CEO title of the combined companies, while Hackett will become president and chief operating officer. The board of directors will consist of nine members from Devon and four members from Ocean.
``We are both in a stronger financial position for merging,'' Nichols said.