Devon Energy: Grayson Mills Energy Acquisition Improves Fair Value Estimate and Williston Position

Narrow-moat Devon announced the acquisition of Grayson Mills Energy on July 8 for $5 billion in cash and stock. Grayson has been rumored to be a target for most of this year at around this price. While we are disappointed that shares were offered as part of the deal since we see them as undervalued, we see the acquisition as accretive for shareholders with our fair value estimate increasing to $59 from $56. About a dollar of that increase is tied to changes in commodity prices and the remainder is due to acquired assets.