UPDATE: Devon Says Will Combine US Midstream Assets with Crosstex

Devon Energy Corporation

(“Devon”), Crosstex Energy, Inc.

and Crosstex Energy, L.P.

(collectively “Crosstex”) today announced the signing of definitive agreements to combine substantially all of Devon's U.S. midstream assets with Crosstex's assets to form a new midstream business. The new business will consist of two publicly traded entities: the Master Limited Partnership and a General Partner entity (the “Master Limited Partnership” and the “General Partner”, collectively “the New Company”). The New Company is expected to have adjusted EBITDA of approximately $700 million in 2014, before synergies. The transaction is expected to be immediately accretive to both Crosstex and Devon. A name for the New Company will be announced prior to the closing of the transaction. The combination of Devon's and Crosstex's extensive midstream systems, including gathering and transportation pipelines, and processing, fractionation and logistics assets, provides the New Company with diversification and scale, along with an enhanced liquids-oriented growth profile. These assets are located in many of North America's premier oil and gas regions, including the Barnett Shale, Permian Basin, Cana and Arkoma Woodford, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus. The New Company will have approximately 7,300 miles of gathering and transportation pipelines, 13 processing plants with 3.3 Bcf/day of net processing capacity, 6 fractionators with 165 MBbl/day of net fractionation capacity, as well as barge and rail terminals, product storage facilities, brine disposal wells and an extensive crude oil trucking fleet. Under the terms of the definitive agreements, in exchange for a controlling interest in both the new General Partner entity and the Master Limited Partnership, Devon will contribute its equity interest in a newly formed Devon subsidiary (“Devon Holdings”) and $100 million in cash. Devon Holdings will own Devon's midstream assets in the Barnett Shale in North Texas, the Cana and Arkoma Woodford Shales in Oklahoma and Devon's interest in Gulf Coast Fractionators in Mt. Belvieu, Texas. The Master Limited Partnership and the General Partner will each own 50% of Devon Holdings. Current stockholders of Crosstex Energy, Inc. will receive one unit in the General Partner entity for each share of Crosstex Energy, Inc. they own, as well as a one-time cash payment at closing of approximately $2.00 per share or $100 million in aggregate. Devon's contributed assets are valued at $4.8 billion in the transaction. Devon, with its strong upstream development portfolio, will be the New Company's largest customer. Devon's inventory of organic exploration and development opportunities, combined with Crosstex's other high-quality third-party customers, provides the Master Limited Partnership a visible path to long-term growth in distributable cash flow. Over time, the potential exists for the General Partner to drop-down its 50% interest in Devon Holdings to the Master Limited Partnership, further enhancing growth for unitholders. Owners of the General Partner entity will benefit from the increased capacity to pay dividends and the acceleration of achievement of the highest-tier incentive distributions through this transaction. “The combined company's midstream assets and expertise greatly accelerate the value proposition of Devon's previously announced standalone master limited partnership in a manner that is highly accretive to our shareholders,” said John Richels, Devon's President and Chief Executive Officer. “Additionally, this transaction provides Devon a market-based valuation for these assets on a go forward basis.” “The integration of Devon's midstream assets with Crosstex provides the New Company with greater operating leverage and strong sponsorship from a leading North American exploration and production company,” said Barry E. Davis, Crosstex's President and Chief Executive Officer. “Indeed our equity holders, customers and employees will benefit from a larger, stronger company. The enhanced financial position will support both existing and new growth projects, provide capacity for greater distribution payouts, and is expected to result in a higher valuation of our equity.” Strategic Rationale * Immediate and meaningful value accretion for both Devon and Crosstex equity holders –Both the Master Limited Partnership and the General Partner will benefit from the increased capacity to pay higher cash distributions and dividends to holders. As a result of the transaction, the cash distributions per unit of the Master Limited Partnership will exceed the highest incentive distribution tier. This maximizes the value of the incentive distribution rights held by the General Partner. * Increased scale and diversification – The transaction combines Devon's large Texas and Oklahoma midstream platform with Crosstex's positions in the Barnett Shale, Permian Basin, Eagle Ford, Haynesville, Gulf Coast, Utica and Marcellus. The combination creates a geographically diverse portfolio of midstream assets, a broad range of predominately fee-based services, and an increasing focus on liquids-based growth projects. * Strong sponsorship – Through its majority ownership in the New Company, Devon is aligned with the interests of unitholders and committed to the New Company's success and ongoing growth. Devon will dedicate nearly 800,000 net acres to the New Company in areas where it expects to develop liquids-driven upstream opportunities. Fixed-fee contracts and minimum volume commitments associated with Devon's midstream assets will also support the stability and growth of the New Company's future cash flows. * Enhanced financial strength – The New Company's investment-grade credit profile will provide access to low-cost capital. This enhanced financial capacity better positions it to secure and execute sizable organic development and acquisition opportunities across the midstream value chain. The Master Limited Partnership's pro forma leverage will be approximately 2.1x debt-to-EBITDA. Additionally, the New Company expects to achieve operational and financial synergies of up to $45 million annually. This includes approximately $20 million in cost savings and approximately $25 million in financing savings, which the New Company expects to achieve from reduced interest costs as a result of its improved credit profile. * Improved cash flow stability – Fixed-fee contracts will account for approximately 95% of the New Company's estimated 2014 adjusted EBITDA. The New Company's cash flow stream is further stabilized by the diversified industries represented in its customer base. * Enhanced growth outlook - The New Company's strong financial foundation will enable it to pursue additional opportunities over and above the $1 billion of growth projects Crosstex currently has underway. In addition to future greenfield projects, the New Company will be positioned to capitalize on opportunities supporting Devon's upstream growth needs. Furthermore, the New Company is expected to have the opportunity to acquire additional Devon assets over time. Specifically, Devon has granted the New Company a right of first offer with respect to Devon's interest in Access Pipeline, a pipeline system serving Devon's growing thermal heavy oil production in Canada. * Cultural alignment and experienced leadership – Devon and Crosstex have a long and successful history of working closely together with a clear understanding of each company's values, internal processes and expectations. The combination brings together highly skilled workforces and a senior management team with a significant track record of creating value in the midstream industry. Transaction Detail The combination is structured to be a tax-free contribution. The new General Partner entity will acquire all shares of Crosstex Energy, Inc. in a one-for-one exchange. Upon closing of the transaction, Crosstex Energy, Inc. stockholders will also receive a one-time cash payment of approximately $2.00 per share, or $100 million in aggregate. Simultaneously, 50% of the equity in Devon Holdings plus $100 million in cash will be contributed to the new General Partner entity in exchange for approximately 70% of the outstanding common units in the General Partner entity. The common units to be received by Devon are valued at $2.4 billion, based on the volume weighted average closing prices of Crosstex Energy, Inc.'s shares for the 20 trading days prior to today's announcement. Devon's remaining 50% equity interest and the general partner interest in Devon Holdings will be contributed to the Master Limited Partnership in exchange for approximately 53% of the outstanding common units in the Master Limited Partnership. The common units to be received by Devon for the contribution of the remaining 50% of equity is valued at $2.4 billion, based on the volume weighted average closing prices of Crosstex Energy, L.P.'s units for the 20 trading days prior to today's announcement. Upon closing of the transactions, the pro forma ownership of the new General Partner entity will be approximately: * 70% - Devon Energy Corporation * 30% - Current Crosstex Energy, Inc. public stockholders Upon closing of the transactions, the pro forma ownership of the Master Limited Partnership entity will be approximately: * 53% - Devon Energy Corporation * 40% - Current Crosstex Energy, L.P. public unitholders * 7% - the new General Partner entity The transaction, which is expected to close in the first quarter of 2014, is subject to approval by the stockholders of Crosstex Energy, Inc., as well as customary regulatory approvals and closing conditions. Crosstex intends to hold a special stockholder meeting as soon as practicable. Stockholders representing approximately 22% of Crosstex Energy, Inc.'s outstanding shares, including Blackstone/GSO Capital, Crosstex Energy, Inc.'s largest stockholder, and certain members of management and directors, have entered into voting agreements under which they have agreed to vote their combined interest in favor of the proposed transaction.