Devon Energy and Coterra Energy announced a definitive merger agreement through an all-stock transaction, specifically under a deal that will result in large-cap shale gas, with an asset base concentrated in the economic core of the Delaware Basin and scale that strengthens its competitive position against other independent producers.
The economic opportunity in the shale gas market
From an operational perspective, the combined company will maintain the Devon Energy name and will be headquartered in Houston, while retaining a significant presence in Oklahoma City. This structure seeks to leverage the historical strengths of both organizations, integrating complementary portfolios and technical capabilities aimed at maximizing free cash flow and earnings per share under different pricing scenarios.
In addition, one of the pillars of the agreement is the identification of annual pre-tax synergies of approximately US$1 billion. The efficiencies are supported by the optimization of the capital program, the improvement of operating margins and the rationalization of corporate costs, with a direct impact on the generation of sustained shareholder value.
In terms of assets, the new Devon is emerging as one of the largest operators in the Delaware Basin, with a position exceeding ten years of high-quality inventory. This portfolio is complemented by a balanced mix of oil and natural gas . natural gasdesigned to sustain a resilient cash flow profile and financial discipline aligned with investment grade standards.
On the other hand, the technological integration is central to the merged company’s strategy. The combination of digital platforms and advanced analytical tools will increase capital efficiency, improve operating performance and support large-scale data-driven decisions, especially in subsurface development.
From a financial standpoint, the transaction provides for a fixed exchange ratio that gives shareholders of both companies a balanced interest in the new entity. In addition, the transaction is expected to be accretive on a per-share basis, including free cash flow and net asset value, while strengthening the balance sheet and reducing the future cost of capital.
Finally, the combined company’s governance will integrate representatives from Devon and Coterra, with Clay Gaspar as chairman and chief executive officer and Tom Jorden as non-executive chairman of the board.
Source and photo: Devon Energy