Devon Energy and Coterra Energy have made a significant announcement regarding their merger, marking an all-stock deal that values the combined entity at approximately $58 billion. This strategic partnership, revealed after weeks of speculation, aims to establish a dominant player in the shale oil sector, particularly enhancing their stakes in key regions such as the Permian Basin while also maintaining operations in the Marcellus Shale and Anadarko Basin.
The new company, which will retain the Devon Energy name and have its headquarters in Houston, is projected to see production levels exceeding 1.6 million barrels of oil equivalent (Boe) per day by the third quarter of 2025. This forecast includes a daily output of over 550,000 barrels of oil and 4.3 billion cubic feet of natural gas.
Both companies anticipate realizing around $1 billion in annual pre-tax synergies as a result of the merger. The alliance is particularly timely, as the current landscape of lower oil prices compels shale producers to optimize their operations to enhance investor returns amid tightening margins.
The merger will create the largest inventory in the Delaware Basin, with a breakeven cost estimated to be under $40 per barrel. Additionally, the new entity is expected to demonstrate superior capital efficiency across various basins, including the Permian, Anadarko, Eagle Ford, Marcellus, and Rockies regions.
Under the merger agreement, Coterra shareholders will receive 0.70 shares of Devon common stock for each share they hold, resulting in Devon shareholders owning approximately 54% of the combined company, while Coterra shareholders will hold around 46%. The transaction has received unanimous approval from the boards of both companies and is expected to finalize by the second quarter of 2026, pending regulatory approvals and shareholder votes.
This merger reflects a broader trend in the oil and gas industry, where consolidation is seen as a strategy to navigate the challenges posed by fluctuating oil prices and increasing operational efficiency. The formation of this powerhouse could lead to enhanced competitiveness and innovation in shale oil production.