Devon Energy and Coterra Energy have agreed to merge in an all-stock transaction valued at $25.5 billion. Announced 2 February, the deal creates a company with a combined enterprise value of nearly $58 billion based on current market valuations.
The merged company would rank among the largest producers in the Permian Basin, with its core position in the Delaware Basin that spans New Mexico and Texas. On a pro forma basis, the combined company will hold about 746,000 net acres in the Delaware Basin and produce nearly 550,000 B/D of oil and 4.3 Bcf/D of natural gas across its portfolio, with more than half of that output coming from the Delaware asset.
In a joint press release, the companies said the Delaware position includes more than 10 years of drilling inventory, totaling over 4,600 locations. They added that the inventory represents what they described as the US shale sector’s largest concentration of locations capable of generating returns at oil prices below $40/bbl.
“We've now built a diverse asset base of high-quality, long duration inventory to drive resilient value creation and returns for shareholders through cycles,” Clay Gaspar, president and CEO of Devon, said in a statement.
He added during a conference call with investors that Devon plans to pursue opportunities to “unlock the gas value” of its portfolio, suggesting this could include supplying the growing US data center market as well as liquefied natural gas exports along the US Gulf Coast.
Gaspar will continue to serve as president and CEO of the combined company, which will operate as Devon and be headquartered in Houston, the current headquarters of Coterra. Tom Jorden, president and CEO of Coterra, will assume the role of nonexecutive chairman of the board, while Devon will appoint a new lead independent director.
The post-merger board of directors will consist of 11 members, with six appointed from Devon and five from Coterra.
The companies said the transaction is expected to generate $1 billion in pre-tax cost synergies by the end of next year. About $300 million of the savings are expected to come from the elimination of redundant corporate expenses and debt refinancing.
An additional $350 million is expected to be realized through capital reallocation and the elimination of asset overlaps, enabling longer lateral lengths in horizontal wells. The remaining $350 million in savings is expected to come from streamlined operations, enhanced infrastructure capabilities, and the integration of the companies’ technical expertise to improve production performance.
Market research and data firm Enverus Intelligence Research said in a research note following the deal announcement that while the transaction includes assets in the Anadarko Basin, Eagle Ford Shale, Marcellus Shale, and the Rockies, the Delaware asset represents the “real prize.” Enverus said the combination would move Devon from the third-largest producer in the region to the largest based on operated volumes.
On a forward-looking basis, Devon would also become the third-largest producer in the Permian on a gross operated basis, with production exceeding 1 million BOE/D, placing it behind only Chevron and ExxonMobil.
“The Delaware Basin, and particularly the northern portion located in New Mexico, holds some of the best quality rock in North America and from an investor’s perspective a company can’t have too much exposure there. It is also a hotbed for resource expansion, with Coterra one of the companies leading the way on unlocking new zones,” Andrew Dittmar, a principal analyst for Enverus.
Under the terms of the agreement, Coterra shareholders will receive a fixed exchange ratio of 0.70 shares of Devon common stock for each share of Coterra common stock. Upon completion, Devon shareholders will own almost 54% of the combined company while Coterra shareholders will own about 46%.
The transaction is expected to close in the second quarter of this year and is, subject to regulatory approvals and customary closing conditions.
The combination follows recent expansion moves by both Devon and Coterra. In 2024, Devon announced a $5 billion acquisition of Grayson Mill Energy from EnCap Investments, adding about 307,000 net acres in the Williston Basin, which is home to the Bakken Shale.
That same year, Coterra agreed to acquire the Permian assets of Franklin Mountain Energy along with properties held by Avant Natural Resources. The transaction added nearly 49,000 net acres in the Delaware.
