Devon Energy Corp announced Tuesday the sale to China’s Sinopec of a one-third stake in five shale projects in the United States. The terms of the deal call for China’s No. 2 oil company to pay 900 million dollars in cash to the US firm and contribute 1.6 billion toward the cost of drilling.
Sinopec is buying into Devon’s operations in the Tuscaloosa Marine Shale in Alabama and Mississippi, the Niobrara in Colorado, the Mississippian, the Utica Shale in Ohio and the Michigan Basin.
“This arrangement improves Devon’s capital efficiency by recovering our land and drilling costs to date and by significantly reducing our future capital commitments,” Devon CEO John Richels said in a statement.
The Oklahoma-based company said it plans to drill 125 wells in the five project areas by the end of 2012.
The process of extracting oil and gas from shale formations relies on a controversial method known as hydraulic fracturing, or “fracking,” which involves injecting a high-pressure stream of water, sand and chemicals into the ground.
Devon’s announcement coincided with the news that French oil major Total is paying Chesapeake Energy 700 million dollars for 25% of an operation in the Utica Shale.