Devon and Coterra Join Forces, Creating an American Giant

Markets took notice after the report that Devon Energy and Coterra Energy agreed to a merger valued at $58 billion. The new energy player is expected after the transaction to produce more than 1.6 million barrels of oil equivalent per day and control approximately 750-thousand acres in the Delaware Basin. Devon shareholders are to own 54% and Coterra shareholders 46%. Management is also communicating a target of annual synergies of $1 billion by the end of 2027 and a plan to return approximately $5 billion to investors through dividends and share buybacks. Closing of the transaction is planned for Q2 2026.

About the company

Devon Energy Corporation is a U.S. publicly traded company focused on the exploration, extraction, and production of oil, natural gas, and natural gas liquids. It was founded in 1971 and is headquartered in Oklahoma City at 333 West Sheridan Avenue. The company’s shares trade on the New York Stock Exchange under the symbol DVN, and Devon is a component of the S&P 500 index. Its asset portfolio is spread across several U.S. basins, including the Delaware Basin, Anadarko Basin, Eagle Ford, and the Rockies region. The company reports approximately 2,300 employees.

A $58 billion deal

Under the announced terms, the merger of Devon Energy and Coterra Energy is valued at $58 billion at the enterprise value level, and it immediately raised the question in the market of whether this is the start of another wave of large mergers in the U.S. upstream. The stock reaction suggested that investors had already priced in part of the scenario in advance, as since the publication of the first reports about talks on January 15, Coterra gained almost 14% and Devon about 6%. On the day of the announcement, however, Coterra fell by 2.4%, and the move came in an environment where oil dropped by about 5%.* Reuters also states that this is the largest deal since 2024, when Diamondback bought Endeavor for $26 billion, which shows that large transactions are returning to the table despite a weaker 2025.[1]

An all-stock deal ties shareholder returns to the success of integration

The transaction is structured as an all-stock deal that directly ties the final return to whether the promised savings and performance after the combination are delivered. Coterra shareholders are to receive a fixed exchange ratio of 0.70 Devon shares for 1 Coterra share, with Devon shareholders expected to own approximately 54% and Coterra shareholders 46% after completion. Governance is to be set so that Clay Gaspar remains President and CEO, and Tom Jorden will be non-executive Chairman of the Board, while the board is to have 11 members, including 6 from Devon and 5 from Coterra. The headquarters is to be in Houston while maintaining a significant presence in Oklahoma City, and closing is expected in Q2 2026 after shareholder and regulatory approvals.[2] [1]

Delaware Basin is the key with 746-thousand acres and 1.6 million barrels per day

The key argument is the scale and quality of the assets, which, after the combination, are intended to create one of the strongest players in the most important U.S. shale regions. The companies communicate that pro forma production for Q3 2025 exceeded 1.6 million barrels of oil equivalent per day, including more than 550-thousand barrels of oil per day and 4.3 billion cubic feet of gas per day. The greatest weight is Delaware, where the presentation states 746-thousand acres and pro forma production of 863-thousand barrels per day for Q3 2025, while Delaware is to account for more than 50% of total production and cash flow, and according to the production split, Delaware is to represent 53%, Marcellus 20%, Anadarko and Eagle Ford 14%, and Rockies 13%. The company claims it has high-quality reservoirs for more than 10 years and that many new wells are economical even at an oil price below $40 per barrel.2[3] [2]        

Synergies, dividends, and share buybacks

The toughest part of the investment thesis rests on the numbers that are meant to justify the size of the transaction and the integration risk. The goal is to achieve annual pre-tax synergies of $1 billion by the end of 2027, with the presentation allocating this amount to $350 million from capital optimization, $350 million from improved operating margins, and $300 million from reduced corporate costs. At the same time, it is communicated that the PV-10 value of the synergies should represent approximately 20% of the pro forma market capitalization, which is intended to be a clear signal that management wants the market to immediately reflect the synergies in the valuation. The company plans a quarterly dividend of $0.315 per share and share buybacks of more than $5 billion. It also states that after the combination, it will have net debt of approximately 0.9x EBITDAX and liquidity of $4.4 billion as of September 30, 2025.23 [3]         

Why this deal is happening now, and what may be the biggest problem

The deal comes at a time when oil companies are looking for a way to produce more cheaply and more efficiently, because there is a lot of oil on the market and profits are under pressure. Reuters also mentions that the situation could be worsened by the return of additional oil from Venezuela. Although the number of large mergers fell in 2025, the pressure to consolidate continues, according to Reuters, and this deal is intended to reduce costs per barrel and strengthen the position, especially in the Delaware and Anadarko areas. Investors are cautious, however, because large combinations do not always deliver the promised results, but an Enverus analyst sees room for improvement of about $700 million through better investment and higher efficiency. The biggest risks are regulatory approvals, managing the combination of the companies, meeting the $1 billion savings target, and the large impact of oil and gas price volatility, while the companies also talk about using technology and AI to increase efficiency.13

Conclusion

The merger of Devon Energy and Coterra Energy is a transaction that aims to change the balance of power as early as 2026. The combined company is to be built on a combination of scale and asset quality, with production of more than 1.6 million barrels of oil equivalent per day and with approximately 750-thousand acres in the Delaware Basin. The investment thesis is based on specific figures, including the target of annual synergies of $1 billion by the end of 2027 and the plan to return approximately $5 billion to shareholders through dividends and share buybacks. At the same time, it is an all-stock deal that leaves shareholders directly bearing the outcome of integration as well as the impact of oil and gas price volatility. If the transaction closes in Q2 2026 and management delivers the savings as well as stable cash flow, it could be one of the most important benchmarks of consolidation in energy in recent years. [4]

* Past performance is not a guarantee of future results.

[1,2,3,4] Forward-looking statements are based on assumptions and current expectations that may be inaccurate, or on the current economic environment, which may change. Such statements are not a guarantee of future performance. They include risks and other uncertainties that are difficult to predict. Results may differ materially from the results expressed or implied in any forward-looking statements.

[1] https://www.reuters.com/legal/transactional/us-shale-producers-devon-coterra-merge-58-billion-deal-2026-02-02/

[2] https://s28.q4cdn.com/696626308/files/doc_events/2026/Feb/02/Devon-and-Coterra-Transformative-Merger.pdf

[3] https://www.globenewswire.com/fr/news-release/2026/02/02/3230104/0/en/devon-energy-and-coterra-energy-to-combine-creating-a-premier-shale-operator.html