OREANDA-NEWS. August 9, 2012. Sumitomo Corporation (SC) has announced that it has signed an agreement with Devon Energy Corporation (Devon) to participate in Devon's tight oil development project in the Permian Basin ("the Project").

Summary of the Project

-- Operator                       :  Devon Energy Corporation

-- Location                       :  13 counties in Texas, U.S.A.

-- Development Project      :  Project life is estimated to be more than 30 years

                                          (Drilling activities are expected to last over a 15 year-period.)

-- Production Composition :  Oil: 60%; NGL*: 20%: Natural Gas: 20%

   *NGL: Natural Gas Liquid

SC portion of the Project

-- Working Interest  :  30%

-- Acquired Assets  :  Existing assets currently held by Devon

                                (lease, existing wells, and facilities)

-- Net Acreage        :  195,000 acres (approximately 790 square kilometers)

-- Consideration      :  Approximately USD 1,365 million

SC has agreed to invest in the non-operated interests of the Project, including leases, existing wells, and facilities. SC will make a cash payment equivalent to 25% of consideration upon closing, and will also pay the rest of the consideration in the form of a drilling carry. SC plans to invest approximately USD 2.0 billion including the consideration and drilling carry over a three year period. SC and Devon will jointly develop three target formations in the co-development area in the Permian Basin. SC is considering financing arrangements mainly from Japan Bank for International Corporation (JBIC).

The Permian Basin has been a prolific producing area since the 1920s as a conventional development field. It has the largest proven oil reserves in North America (approximately 5 billion barrels), by far exceeding those of Alaska and the Gulf of Mexico.?The development area for the Project, located in the eastern area of the Permian Basin, is expected to have enormous resources from the long history of drilling activities. In addition to our three target formations, many other formations are proven to hold hydrocarbons in the development area and therefore, we expect incremental reserves through future development.

In December 2009, SC, as the first Asian company to join a shale gas project in the United States, decided to participate in the shale gas development project in the Barnett Shale Fields, in Texas. The following year in September, SC also participated in the Marcellus Shale Fields in Pennsylvania. As the next step, SC decided to participate to the Project which is a large-scale tight oil development project with Devon, one of the leading companies in Shale gas/Tight Oil business. This participation in the Project will enable SC to become one of the largest Japanese acreage - holders in the United States.

Leveraging SC's integrated corporate strength, SC is planning to expand business in the fast growing unconventional energy industry with multidimensional approaches, such as a global development of shale gas and tight oil development projects, crude oil/natural gas trade business within the United States, petrochemical business, steel pipe business, and other associated business.