(Bloomberg) — Devon Energy Corp. agreed to buy rival shale driller Coterra Energy Inc. for about $21.4 billion in stock, one of the largest oil and gas deals in years.
The deal calls for Coterra shareholders to receive 0.7 Devon shares for each share they own, according to a statement Monday. The company will retain the Devon name and Devon CEO Clay Gaspar will continue as CEO after the deal closes.
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Bloomberg News first reported on the talks earlier this year and revealed last week that a deal was close.
The deal, expected to close in the second quarter and deliver about $1 billion in pre-tax savings, shows how shale oil companies are driving consolidation now that many of the best drilling sites in the United States have been developed. The merger will strengthen their position in the Permian Basin in West Texas and New Mexico, the largest and most productive U.S. oil field, allowing them to gain scale and better compete with rivals such as Exxon Mobil Corp. and Diamondback Energy Inc.
“We have now built a diversified asset base of high-quality, long-term inventory to drive shareholder creation of resilient value and returns through the cycle,” Gaspar said on Monday.
Devon shareholders will own 54% of the combined company, and Coterra shareholders will own 46%.
Devon holds rights to approximately 400,000 net acres in the Permian Basin’s fast-growing Delaware Basin, where Cotela also owns 346,000 acres. Coterra also has a large stake in the Marcellus Shale.
The combined company will become one of the largest oil and natural gas producers in the U.S. shale sector, with output expected to exceed 1.6 million barrels of oil equivalent per day in the third quarter. The deal has an enterprise value of approximately $58 billion.
Coterra was formed in 2021 from the merger of Cimarex Energy Co. and Cabot Oil & Gas Corp. At the time, analysts were puzzled by the logic of pairing oil-focused Cimarex with gas-focused Cabot.
Kimmeridge Energy Management Co., an outspoken oil and gas investor with stakes in both companies, said it supports a potential tie-up that would allow the combined company to focus on its Delaware Basin assets.
Once the deal closes, Devon will move its headquarters to Houston while retaining operations in its current location in Oklahoma City.
