Back in November, Devon Energy (DVN) announced it was unloading its offshore assets and the expectation was that the windfall would be anywhere from $4.5 billion to $7.5. But since then the oil market has heated up.Just last month Devon got a tidy $7 billion from BP (BP) for a portfolio of offshore assets in Brazil.

And this week Devon had some more good news. The company sold its shallow-water oil assets, based in the Gulf of Mexico, for $1.05 billion to Apache (APA). On a after-tax basis, Devon is likely to net $840 million.

The company will next unload its China-based assets, which are also likely to fetch a premium price.

Number One in The Gulf?


Apache is the second largest producer of oil and gas in the Gulf for wells that are 1,200 feet deep or less. The company is currently behind Chevron (CVX). However, Apache's deal for the Devon assets may make the company the number one operator.

As for Devon's Gulf assets, they encompass 477,000 acres across Texas, Louisiana and Alabama. There are 80 platforms as well as 211 production caissons, with the fields producing a combination of natural gas and liquids. In fact, the Devon properties appear to have lots of exploration potential. For example, Apache has already found 79 recompletion possibilities and 26 drilling prospects.

The transaction comes to roughly 3.7 times cash flows. As a result, the deal is expected to be accretive to earnings.

So all in all, this looks like a good deal. After all, Apache has been aggressively seeking to enhance its Gulf footprint. Just last year, the company paid $181.1 million for nine Permian Basin oil and gas fields from Marathon Oil (MRO).

Going Onshore

While the Gulf has been a rich source of oil, there have been challenges. The fields are fairly mature and the costs can be high. At the same time, there is a risk of hurricanes. Yet, Apache has a proven track record in extracting value from the region.

So what's the next step for Devon? The company will take steps to pay down its debt and also buy back shares. But with a nice slug of cash from its divestitures, Devon also plans to focus on opportunities in North America. And yes, this should involve more acquisitions over the next couple years.

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