Devon, Coterra Agree to $58 Billion Merger Creating Major U.S. Shale Producer
Two major U.S. shale producers are combining forces in one of the largest oil and gas mergers since 2024, aiming to boost scale, cut costs, and strengthen their foothold in key basins as consolidation reshapes the sector.
(Reuters) — Oklahoma City-based Devon Energy and Houston's Coterra Energy are merging in an all-stock deal to become a large-cap producer with a top position in the Permian Basin as shale operators consolidate to cut costs and boost scale.
The deal on Feb. 2 to create a company with an enterprise value of $58 billion is the largest in the sector after Diamondback bought Endeavor Energy Resources for $26 billion in 2024.
The consolidation comes as a global oil glut and the increasing chance of more Venezuelan barrels returning to the market pressures U.S. crude prices, hurting shale producers' margins.
Even though M&As in the sector cooled in 2025, producers in the shale patch continue to pursue size advantages from lowering per‑barrel costs to extending drilling runways in maturing basins like the Permian and Anadarko.
Devon CEO Clay Gaspar will lead the combined company, while Coterra CEO Tom Jorden will become non-executive chairman.
Coterra shares have risen nearly 14% since deal talks were first reported on Jan. 15, while Devon has gained about 6%. Both the stocks were trading lower on Monday, with Devon off about 1% and Coterra falling 2.8%, tracking a roughly 5% slide in oil prices.
The deal has an equity value of $21.4 billion, according to a Reuters calculation. According to the terms, Coterra shareholders will receive 0.70 Devon shares for each share held. Devon will own roughly 54% of the combined company.
"The combination is incrementally positive for both shareholders, as it brings together two high-quality companies to create a larger entity that should garner greater investor interest in today's volatile energy tape," said Siebert Williams Shank & Co. analyst Gabriele Sorbara.
Devon and Coterra are targeting $1 billion in annual pre-tax savings by 2027 and plan to lift shareholder returns through higher dividends and a share buyback program of more than $5 billion.
The companies will also pursue gains by combining and developing their AI capabilities.
"Scale of this magnitude unlocks operational and financial advantages that simply aren't available to operators of less scale," Devon CEO Clay Gaspar said on a conference call with analysts.
"It gives the ability to expand margins through operational efficiency across our overlapping asset base."
Operations in Major Basins
Devon and Coterra operate in several major U.S. shale formations, with overlapping positions in the Delaware portion of the Permian Basin in Texas and New Mexico, as well as in Oklahoma's Anadarko Basin.
Production in 2026 is expected to exceed 1.6 million barrels of oil equivalent per day. Over half of production and cash flow would come from the Delaware Basin, where the combined company will hold roughly 750,000 net acres in the core of the play.
Devon said the combined portfolio would provide more than 10 years of high-quality inventory, including the largest share of sub-$40 break-even wells.
The merger is expected to close in the second quarter of 2026, after which the combined company will retain the name Devon.
While the company will maintain a major presence in Oklahoma City, the headquarters will be located in Houston with executive staff relocating there.