Devon, Coterra Sign ‘Blockbuster’ Merger Deal

In a joint statement released Monday, Devon Energy and Coterra Energy announced the signing of a definitive agreement to merge in an all-stock transaction.

The combination will create a “leading large-cap shale operator with a high-quality asset base anchored by a premier position in the economic core of the Delaware Basin”, according to the statement, which noted that the combined company will be named Devon Energy and will be headquartered in Houston, while maintaining a “significant presence” in Oklahoma City.

“The formation of this premier company is expected to unlock substantial value by leveraging each company’s core strengths and through the realization of $1 billion in annual pre-tax synergies,” the statement said.

“The realization of synergies, technology-driven capital efficiency gains, and optimized capital allocation will drive near and long-term per share growth,” it added.

Under the terms of the deal, Coterra shareholders will receive a fixed exchange ratio of 0.70 share of Devon common stock for each share of Coterra common stock, the statement pointed out.

“Based on Devon’s closing price on January 30, 2026, the transaction implies a combined enterprise value of approximately $58 billion,” the statement highlighted.

“Upon completion, Devon shareholders will own approximately 54 percent of the go-forward company and Coterra shareholders will own approximately 46 percent on a fully diluted basis,” it added.

The transaction was unanimously approved by the boards of directors of both companies, the statement revealed, adding that the deal is expected to close in the second quarter of 2026, subject to regulatory approvals and customary closing conditions, including approvals by Devon and Coterra shareholders.

The joint statement noted that the merger will create “one of the world’s leading shale producers, with pro forma third quarter 2025 production exceeding 1.6 million barrels of oil equivalent per day, including over 550,000 barrels of oil per day and 4.3 billion cubic feet of gas per day”.

“The combined company’s portfolio will be anchored by world-class acreage in the Delaware Basin, complemented by a balanced and diversified product mix that positions the company to deliver a resilient free cash flow profile,” it added.

According to the statement, the transaction is expected to be accretive to all shareholders on “key per-share financial measures, including free cash flow and net asset value”. The statement also outlined that the deal will accelerate shareholder returns.

“The company’s strong financial foundation combined with accretion from synergy capture will allow for the acceleration of cash returns to shareholders,” the statement said.

“Upon closing, the company plans to declare a quarterly dividend of $0.315 per share and establish a new share repurchase authorization in excess of $5 billion, both subject to board approval,” it added.

In the statement, Clay Gaspar, Devon’s President and CEO, said, “this transformative merger combines two companies with proud histories and cultures of operational excellence, creating a premier shale operator”.

 “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. Underpinned by our leading position in the best part of the Delaware Basin, and a deep set of complementary assets, we expect to capture annual pre-tax synergies of $1 billion,” he added.

“This will drive higher free cash flow and greater shareholder returns beyond what either company could achieve alone,” he continued.

Tom Jorden, Chairman, CEO, and President of Coterra, said in the statement, “this combination enhances the Delaware and brings together two premier organizations with complementary cultures rooted in operational excellence, disciplined capital allocation, and data-driven decision-making focused on creating per share value”.

“The combined company will offer best-in-class rock quality and inventory depth, supported by a balanced commodity mix, leading cost structure, and a conservative balance sheet,” he said.

“Devon Energy will be strongly positioned to deliver top-tier capital efficiency gains and consistent profitable per share growth through the commodity cycles,” Jorden went on to state.

Analyst View

In an analysis sent to Rigzone on Monday, Andrew Dittmar, Principal Analyst at Enverus Intelligence Research (EIR), said “consolidation among large-cap E&Ps is back on the table with Devon Energy’s blockbuster $26 billion acquisition of Coterra Energy”.

“The deal is comparable in size to Diamondback’s Endeavor purchase and the fourth largest upstream combination since 2020,” Dittmar added, highlighting that it “forms a company with a pro forma enterprise value of $58 billion”.

“Coterra shareholders will receive 0.7 shares of Devon per outstanding share. That is around a 12 percent premium to the unaffected share price before rumors of the combination emerged in mid-January, but a slight discount to the company’s Friday close,” he noted.

In the analysis, Dittmar said the acquisition is another example of multi-basin M&A, which he pointed out has included combinations by smaller public E&Ps.

“That type of deal is more common as the U.S. upstream space progresses further into a multi-year consolidation cycle and opportunities to strategically add exposure to one core play have become scarce,” he said.

“Investors have often cast a skeptical eye towards these types of deals and panned combinations that appeared to simply be the pursuit of scale. However, the tie-up of Devon and Coterra has strategic rationale supporting it,” he added.

“The companies share exposure to the Anadarko and Delaware basins. The merger plan calls for $1 billion in annual synergies by year-end 2027 including $700 million in capital optimization and margin improvements,” he noted.

“Synergies are a cornerstone of the all-equity combination and longer-term success of the deal will in a large part hinge on delivering synergy capture,” he continued.

Dittmar went on to state that the Delaware Basin is the real prize of the deal from Devon’s perspective and the centerpiece of the combined company.

“The deal propels Devon from the third largest to top producer in the prolific Delaware Basin based on gross operated volumes and positions it as a top three overall Permian producer on a gross operated basis with more than one million barrels of oil equivalent per day,” he said.

“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,” he added.

“It is also a hotbed for resource expansion, with Coterra one of the companies leading the way on unlocking new zones. Devon will now add this to its existing footprint in the play, and the Delaware will play a key role in delivering on expected synergies,” he continued.

“Delaware inventory in the combined company’s portfolio far outstrips any other play. The next largest play by remaining undeveloped locations for pro forma Devon, the Williston, has less than 15 percent of the remaining locations of the Delaware,” he stated.

Dittmar highlighted in the statement that, overall, Devon will have operations across six major plays, including a new position in the Marcellus.

“No divestment target was given as part of the deal, but the combined company could capitalize on a robust market for asset sales to trim its portfolio,” Dittmar pointed out.

“The scale of the Marcellus position, which contributes about 42 percent of Coterra’s total net production or two billion cubic foot equivalent per day, limits the pool of acquirers if that is on Devon’s list to sell,” he said.

“However, the quality of the inventory and unique opportunity to acquire a position of scale in northeast Pennsylvania could draw interest from large buyers,” he added.

Other divestments could come from the company’s combined Anadarko Basin positions, Dittmar noted.

“The Anadarko Basin is a popular candidate for non-core sales given strong buyer appetite from private capital in a basin public companies view as less strategic in their portfolios,” he said. .

In the analysis, Dittmar noted that the combination of Devon and Coterra “demonstrates that the wave of consolidation sweeping U.S. shale isn’t finished yet and the march towards fewer, larger producers feels inevitable”.

“That said, it doesn’t necessarily presage a stampede of mergers like was seen in 2023 and 2024 when companies may have felt pressure to jump in or be left behind,” he added.

“With fewer obvious targets left, corporate dealmaking from here is likely a slow, methodical grind of finding the right partner at the right point in time,” Dittmar concluded.

To contact the author, email andreas.exarheas@rigzone.com