Devon Energy and Coterra Energy Announce All-Stock Merger to Create Permian Powerhouse
Devon Energy, based in Oklahoma City, and Houston-based Coterra Energy have announced an all-stock merger. The objective of this combination is to establish a large-cap producer with a leading position in the Permian Basin, as shale operators consolidate to reduce costs and enhance scale.
The deal, which was announced on Monday, will create a company with an enterprise value of $58 billion. This transaction represents the largest in the sector following Diamondback's acquisition of Endeavor Energy Resources for $26 billion in 2024.
Strategic Rationale Amid Market Pressures
Consolidation in the sector is occurring amid a global oil surplus and the increasing potential for Venezuelan oil to re-enter the market. This scenario puts pressure on U.S. crude prices and impacts shale producers' margins.
Despite a decrease in M&A activity in 2025, shale producers continue to pursue scale advantages, aiming to lower per-barrel costs and extend drilling opportunities in mature basins like the Permian and Anadarko.
Financial Details
The deal has an equity value of $21.4 billion. According to the terms, Coterra shareholders will receive 0.70 Devon shares for each share held. Devon is projected to own approximately 54% of the combined company.
Leadership and Synergy Targets
Devon CEO Clay Gaspar will lead the combined company, and Coterra CEO Tom Jorden will assume the role of non-executive chairman.
The companies are targeting $1 billion in annual pre-tax savings by 2027. They also plan to increase shareholder returns through higher dividends and a share buyback program exceeding $5 billion. Additionally, the merger aims to achieve gains by combining and developing their artificial intelligence (AI) capabilities.
"The scale achieved through this merger is expected to unlock operational and financial advantages that were previously unavailable to smaller operators."
This is anticipated to allow for margin expansion through operational efficiency across their overlapping asset bases.
Analyst Outlook and Future Consolidation
Analysis indicates that the combination is incrementally positive for both sets of shareholders, bringing together two high-quality companies to create a larger entity that may attract greater investor interest. The tie-up is noted for its strategic rationale, including potential for $700 million in capital optimization and margin improvements. It is suggested that the wave of consolidation in U.S. shale is ongoing, with future corporate dealmaking likely to involve strategic partner identification.