Devon-Coterra merger to create $58 billion US shale major in all-stock deal

Oklahoma City-based Devon Energy and Houston’s Coterra Energy are merging in an all-stock deal to become a top-ranked large-scale producer in the Permian Basin as shale operators join forces to cut costs and increase scale.

Monday’s deal to create a company with an enterprise value of $58 billion is the largest in the industry since Diamondback acquired Endeavor Energy Resources for $26 billion in 2024.

The consolidation comes as a global oil glut and the increasing likelihood of more Venezuelan barrels returning to the market has weighed on U.S. crude oil prices, hurting margins for shale producers.

Although mergers and acquisitions in the industry have cooled in 2025, producers in the shale region continue to pursue size advantages, from lowering costs per barrel to expanding drilling runs in maturing basins such as 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 gained about 14% since deal talks were first reported Jan. 15, while Devon has gained about 6%. Coterra shares fell 2.4% on Monday, following a nearly 5% drop in oil prices.

The equity value of the deal is $21.4 billion, according to a Reuters calculation. Under the terms, Coterra shareholders will receive 0.70 shares of Devon stock for each share they own. Devon will own approximately 54% of the combined company.

Siebert Williams Shank & Co. “This merger is an increasingly positive development for both shareholders as it brings together two high-quality companies to create a larger entity that will be of greater interest to investors in today’s volatile energy band,” analyst Gabriele Sorbara said.

Devon and Coterra are targeting $1 billion in annual pre-tax savings by 2027 and plan to boost shareholder returns through higher dividends and a share buyback program worth more than $5 billion.

Companies will also seek to gain by combining and developing artificial intelligence capabilities.

“This level of scale unlocks operational and financial advantages that smaller-scale operators cannot access,” Devon CEO Clay Gaspar said on a conference call with analysts.

“It provides the ability to expand margins through operational efficiencies across our overlapping asset base.”

Andrew Dittmar, principal analyst at Enverus Intelligence Research, said investors are often skeptical of such combinations in pursuit of scale alone, but the Devon-Coterra partnership has strategic logic, pointing to the potential for $700 million in capital optimization and margin improvements.

“The combination of Devon and Coterra shows that the wave of consolidation sweeping US shale is far from over…. corporate deals from here on out are likely to be a slow, methodical grind of finding the right partner at the right point at the right time, as fewer obvious targets remain.”

OPERATIONS IN LARGE BASINS

Devon and Coterra operate in several major shale formations in the United States, with overlapping positions in the Delaware portion of the Permian Basin in Texas and New Mexico, and in Oklahoma’s Anadarko Basin.

In 2026, production is expected to exceed 1.6 million barrels of oil equivalent per day. More than half of the production and cash flow will come from the Delaware Basin, where the combined company will retain approximately 750,000 net acres of land in the heart of the play.

The combined portfolio will provide more than 10 years of high-quality inventory, including the largest share of breakeven wells in the sub-$40s, Devon said.

The merger is expected to be completed in the second quarter of 2026, after which the combined company will retain the Devon name.

While the company maintains a large presence in Oklahoma City, headquarters will be in Houston and executive staff will move there.