Veriton Investment

Devon Agrees to Buy Oil Rival Coterra for $21.4 Billion in Stock

(Bloomberg) — Devon Energy Corp. (DVN) agreed to acquire rival shale driller Coterra Energy Inc. (CTRA) for about $21.4 billion in stock, one of the largest oil and natural gas deals in years.

The deal calls for Coterra stockholders to receive 0.7 Devon shares for each share they own, according to a statement Monday. The company will keep the Devon name, and Devon Chief Executive Officer Clay Gaspar will remain as CEO after the deal closes.

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Bloomberg News first reported the talks earlier this year and revealed last week that a deal was near.

The deal, expected to close in the second quarter and generate about $1 billion in pre-tax savings, illustrates how shale companies are pushing to consolidate as many of the best US drilling sites have been tapped. The combination would strengthen their positions in the Permian Basin of West Texas and New Mexico, the country’s largest and most productive oil field, giving them more scale to better compete with rivals such as Exxon Mobil Corp. and Diamondback Energy Inc.

“We’ve now built a diverse asset base of high-quality, long duration inventory to drive resilient value creation and returns for shareholders through cycles,” Gaspar said on Monday.

Devon shareholders will own 54% of the combined company, and Coterra shareholders will own 46%.

Devon has rights to about 400,000 net acres in a fast-growing swath of the Permian known as the Delaware Basin, where Coterra also has a 346,000-acre position. Coterra also has a large position in the Marcellus Shale.

The combined company would be one of the biggest oil and natural gas producers in US shale with pro-forma third quarter output of more than 1.6 million barrels per day of oil equivalent. The enterprise value of the deal is around $58 billion.

Coterra was formed through the 2021 merger of Cimarex Energy Co. and Cabot Oil & Gas Corp. At the time, analysts were baffled by the logic of oil-heavy Cimarex pairing with Cabot, which focused on natural gas.

Kimmeridge Energy Management Co., an outspoken oil and gas investor with stakes in both companies, has voiced support for a potential tie-up that would allow the combined company to focus on their Delaware Basin assets.

After the close, Devon will move its headquarters to Houston while keeping a presence in Oklahoma City where it’s currently based.

Evercore is serving as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal advisor to Devon. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are serving as financial advisors to Coterra. Goldman Sachs & Co. LLC also provided a fairness opinion to Coterra. Gibson, Dunn & Crutcher LLP is serving as legal advisor to Coterra.

—With assistance from Ryan Gould and Dinesh Nair.