In a joint assertion launched Monday, Devon Power and Coterra Power introduced the signing of a definitive settlement to merge in an all-stock transaction.
The mix will create a “main large-cap shale operator with a high-quality asset base anchored by a premier place within the financial core of the Delaware Basin”, in keeping with the assertion, which famous that the mixed firm might be named Devon Power and might be headquartered in Houston, whereas sustaining a “vital presence” in Oklahoma Metropolis.
“The formation of this premier firm is anticipated to unlock substantial worth by leveraging every firm’s core strengths and thru the belief of $1 billion in annual pre-tax synergies,” the assertion mentioned.
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“The belief of synergies, technology-driven capital effectivity features, and optimized capital allocation will drive close to and long-term per share development,” it added.
Beneath the phrases of the deal, Coterra shareholders will obtain a set alternate ratio of 0.70 share of Devon widespread inventory for every share of Coterra widespread inventory, the assertion identified.
“Primarily based on Devon’s closing value on January 30, 2026, the transaction implies a mixed enterprise worth of roughly $58 billion,” the assertion highlighted.
“Upon completion, Devon shareholders will personal roughly 54 % of the go-forward firm and Coterra shareholders will personal roughly 46 % on a totally diluted foundation,” it added.
The transaction was unanimously accepted by the boards of administrators of each corporations, the assertion revealed, including that the deal is anticipated to shut within the second quarter of 2026, topic to regulatory approvals and customary closing circumstances, together with approvals by Devon and Coterra shareholders.
The joint assertion famous that the merger will create “one of many world’s main shale producers, with professional forma third quarter 2025 manufacturing exceeding 1.6 million barrels of oil equal per day, together with over 550,000 barrels of oil per day and 4.3 billion cubic toes of gasoline per day”.
“The mixed firm’s portfolio might be anchored by world-class acreage within the Delaware Basin, complemented by a balanced and diversified product combine that positions the corporate to ship a resilient free money circulation profile,” it added.
In keeping with the assertion, the transaction is anticipated to be accretive to all shareholders on “key per-share monetary measures, together with free money circulation and internet asset worth”. The assertion additionally outlined that the deal will speed up shareholder returns.
“The corporate’s sturdy monetary basis mixed with accretion from synergy seize will permit for the acceleration of money returns to shareholders,” the assertion mentioned.
“Upon closing, the corporate plans to declare a quarterly dividend of $0.315 per share and set up a brand new share repurchase authorization in extra of $5 billion, each topic to board approval,” it added.
Within the assertion, Clay Gaspar, Devon’s President and CEO, mentioned, “this transformative merger combines two corporations with proud histories and cultures of operational excellence, making a premier shale operator”.
“We’ve now constructed a various asset base of high-quality, lengthy length stock to drive resilient worth creation and returns for shareholders via cycles. Underpinned by our main place in one of the best a part of the Delaware Basin, and a deep set of complementary property, we count on to seize annual pre-tax synergies of $1 billion,” he added.
“This may drive increased free money circulation and larger shareholder returns past what both firm might obtain alone,” he continued.
Tom Jorden, Chairman, CEO, and President of Coterra, mentioned within the assertion, “this mixture enhances the Delaware and brings collectively two premier organizations with complementary cultures rooted in operational excellence, disciplined capital allocation, and data-driven decision-making targeted on creating per share worth”.
“The mixed firm will provide best-in-class rock high quality and stock depth, supported by a balanced commodity combine, main value construction, and a conservative stability sheet,” he mentioned.
“Devon Power might be strongly positioned to ship top-tier capital effectivity features and constant worthwhile per share development via the commodity cycles,” Jorden went on to state.
Analyst View
In an evaluation despatched to Rigzone on Monday, Andrew Dittmar, Principal Analyst at Enverus Intelligence Analysis (EIR), mentioned “consolidation amongst large-cap E&Ps is again on the desk with Devon Power’s blockbuster $26 billion acquisition of Coterra Power”.
“The deal is comparable in measurement to Diamondback’s Endeavor buy and the fourth largest upstream mixture since 2020,” Dittmar added, highlighting that it “varieties an organization with a professional forma enterprise worth of $58 billion”.
“Coterra shareholders will obtain 0.7 shares of Devon per excellent share. That’s round a 12 % premium to the unaffected share value earlier than rumors of the mixture emerged in mid-January, however a slight low cost to the corporate’s Friday shut,” he famous.
Within the evaluation, Dittmar mentioned the acquisition is one other instance of multi-basin M&A, which he identified has included mixtures by smaller public E&Ps.
“That kind of deal is extra widespread because the U.S. upstream house progresses additional right into a multi-year consolidation cycle and alternatives to strategically add publicity to 1 core play have turn into scarce,” he mentioned.
“Buyers have typically solid a skeptical eye in direction of these kind of offers and panned mixtures that appeared to easily be the pursuit of scale. Nonetheless, the tie-up of Devon and Coterra has strategic rationale supporting it,” he added.
“The businesses share publicity to the Anadarko and Delaware basins. The merger plan requires $1 billion in annual synergies by year-end 2027 together with $700 million in capital optimization and margin enhancements,” he famous.
“Synergies are a cornerstone of the all-equity mixture and longer-term success of the deal will in a big half hinge on delivering synergy seize,” he continued.
Dittmar went on to state that the Delaware Basin is the actual prize of the deal from Devon’s perspective and the centerpiece of the mixed firm.
“The deal propels Devon from the third largest to high producer within the prolific Delaware Basin primarily based on gross operated volumes and positions it as a high three general Permian producer on a gross operated foundation with a couple of million barrels of oil equal per day,” he mentioned.
“The Delaware Basin, and significantly the northern portion situated in New Mexico, holds a few of the highest quality rock in North America and from an investor’s perspective an organization can’t have an excessive amount of publicity there,” he added.
“It is usually a hotbed for useful resource enlargement, with Coterra one of many corporations main the best way on unlocking new zones. Devon will now add this to its current footprint within the play, and the Delaware will play a key position in delivering on anticipated synergies,” he continued.
“Delaware stock within the mixed firm’s portfolio far outstrips some other play. The subsequent largest play by remaining undeveloped areas for professional forma Devon, the Williston, has lower than 15 % of the remaining areas of the Delaware,” he said.
Dittmar highlighted within the assertion that, general, Devon may have operations throughout six main performs, together with a brand new place within the Marcellus.
“No divestment goal was given as a part of the deal, however the mixed firm might capitalize on a strong marketplace for asset gross sales to trim its portfolio,” Dittmar identified.
“The size of the Marcellus place, which contributes about 42 % of Coterra’s complete internet manufacturing or two billion cubic foot equal per day, limits the pool of acquirers if that’s on Devon’s record to promote,” he mentioned.
“Nonetheless, the standard of the stock and distinctive alternative to amass a place of scale in northeast Pennsylvania might draw curiosity from giant patrons,” he added.
Different divestments might come from the corporate’s mixed Anadarko Basin positions, Dittmar famous.
“The Anadarko Basin is a well-liked candidate for non-core gross sales given sturdy purchaser urge for food from non-public capital in a basin public corporations view as much less strategic of their portfolios,” he mentioned. .
Within the evaluation, Dittmar famous that the mixture of Devon and Coterra “demonstrates that the wave of consolidation sweeping U.S. shale isn’t completed but and the march in direction of fewer, bigger producers feels inevitable”.
“That mentioned, it doesn’t essentially presage a stampede of mergers like was seen in 2023 and 2024 when corporations might have felt stress to leap in or be left behind,” he added.
“With fewer apparent targets left, company dealmaking from right here is probably going a sluggish, methodical grind of discovering the suitable associate on the proper time limit,” Dittmar concluded.
To contact the creator, e-mail andreas.exarheas@rigzone.com
