Coterra and Devon Explore Merger to Create Major U.S. Shale Player

Coterra Energy Inc. CTRA and Devon Energy Corporation DVN are reportedly exploring a potential merger that could create one of the largest independent shale producers in the United States. Discussions are still at an early stage, and there is no certainty that a transaction will materialize. Both companies declined to comment on the talks.

If completed, the deal would rank among the largest combinations between U.S. energy producers in recent years. The timing reflects mounting pressure across the oil and gas sector, with crude prices weighed down by a near-term global supply glut and expectations of additional supply entering the market in the coming years, including from Venezuela.

Weak Oil Prices Revive the Case for Consolidation

While mergers and consolidations of energy companies slowed in 2025 compared with the record activity seen in earlier years, the strategic logic for consolidation remains intact. Mergers offer producers the ability to achieve economies of scale, helping control costs in a depressed pricing environment. Larger platforms also provide access to deeper inventories at a time when many shale basins are maturing and high-quality undeveloped acreage is becoming increasingly scarce.

Against this backdrop, a Coterra-Devon combination would allow the companies to better navigate volatile commodity markets and control costs while strengthening their competitive position across multiple core U.S. basins.

Complementary Shale Footprints Across Key Basins

Both companies operate across several major shale plays. Coterra and Devon each have a presence in the Delaware Basin portion of the Permian in Texas and New Mexico, as well as in Oklahoma’s Anadarko Basin. Devon also holds assets in South Texas’ Eagle Ford and North Dakota’s Williston Basin.

Coterra, meanwhile, has a strong footprint in Appalachia. The company was formed in 2021 through the merger of Cimarex Energy and Cabot Oil & Gas, combining oil-weighted Permian assets with gas-focused Marcellus acreage. Together, the two companies would control a broad, diversified portfolio across some of the most important U.S. shale regions.

Devon holds roughly 400,000 net acres in the Permian’s Delaware Basin, alongside Coterra’s 346,000-acre footprint, and a merger would strengthen the combined company’s ability to take on Permian heavyweights like Exxon Mobil Corporation XOM and Diamondback Energy, Inc. FANG.

Exxon is a U.S. oil and gas giant that generates a significant portion of its revenues from exploration and production activities in two key regions — the Permian Basin and oil and gas resources in Guyana. In the Permian Basin, XOM holds the largest supply of Tier 1 acreage within its asset portfolio.

Diamondback Energy is also a pure-play Permian operator. FANG has a huge inventory of oil and gas wells, thereby showcasing a solid production outlook.

Activist Pressure Adds Momentum

Coterra, currently carrying a Zacks Rank #3 (Hold), is under pressure from activist investor Kimmeridge Energy Management. Kimmeridge is one of the most prominent activist investors in the oil and gas sector and also holds a position in Devon, according to regulatory filings.

However, Kimmeridge has expressed support for a transaction that would allow a combined company to focus more heavily on its highest-quality Delaware Basin assets. The firm believes a merger could unlock meaningful operational synergies through greater scale and overlapping acreage positions, strengthening efficiency and returns.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A Transformational Deal Still Uncertain

Although the strategic rationale is clear, sources caution that talks remain preliminary and a deal is far from guaranteed. Still, the discussions highlight how persistent market pressures, basin maturity, and shareholder activism are continuing to drive consolidation conversations across the U.S. shale industry.

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This article originally published on Zacks Investment Research (zacks.com).

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