Devon Energy Corp. (NYSE: DVN) has passed regulatory muster for its $6 billion Eagle Ford deal and its plans to create a new midstream business.

Devon has also secured a $2 billion senior unsecured loan from Morgan Stanley Senior Funding that will only be used in connection with its Eagle Ford purchase, according to documents filed with the Securities and Exchange Commission on Dec. 16.

The loan is split into two $1 billion chunks, one with a three-year term and the other with a five-year term. In the event that the acquisition fails to close, the loan will be terminated.

Devon announced it had been cleared by the Federal Trade Commission (FTC) for its previously announced purchase of Eagle Ford assets from GeoSouthern Energy. The acquired assets include production of 53,000 barrels of oil equivalent per day (BOE/d) on 82,000 net acres with 1,200 undrilled locations.

FTC records show the premerger notification was terminated early, on Dec. 16.

Devon’s development program on the Eagle Ford assets is self-funding and the transaction is immediately accretive to cash flow per debt adjusted share. DVN will fund the transaction through a combination of cash and borrowings and is expected to close in first quarter 2014.

Fourth quarter net production is expected to be 54 MBOE/d. Devon plans to spend $1.3 billion and run 19 rigs with a goal of 230 wells.

Production will consist of:

  • 56% Oil
  • 20% NGLs
  • 24% Gas

Devon’s oil production is fully hedged at more than $90 per barrel.

Devon also has cleared the legal hurdles that will allow it to create a midstream business with Crosstex Energy Inc. (Nasdaq: XTXI) and Crosstex Energy LP (Nasdaq: XTEX).

Authorities did not challenge the new business has not been challenged in the waiting period required by the Hart-Scott-Rodino Act. The act established the federal premerger notification program, which provides the FTC and the Department of Justice with information about large mergers and acquisitions before they occur.

The midstream business will consist of two publicly traded entities: the Master Limited Partnership and a General Partner entity in which Devon will have a 70% stake.

Devon is contributing assets valued at $4.8 billion to the transaction. The new company is expected to have adjusted EBITDA of about $700 million in 2014, before synergies.  

Devon is working to sell several non-core assets representing 150 MBOE/d. They include its Canadian conventional, Rockies, Arkoma Woodford and Groesbeck/Gulf Coast holdings.