Coterra Energy and Devon Energy Seal $58 Billion Merger Deal

Coterra Energy CTRA and Devon Energy DVN have formally disclosed a definitive agreement to merge through an all-stock transactionin a move that promises to reshape the landscape of the shale energy industry. This strategic merger is set to create a dominant large-cap shale operator, combining the strengths of both companies to drive substantial value and establish a strong foundation for sustained shareholder growth.

Key Details of the Merger

Under the terms of the agreement, Coterra’s shareholders will accept a fixed exchange ratio of 70 cents per share of Devon common stock for each share of the former’s common stock. This transaction, based on Devon’s closing price on Jan. 30, 2026, implies a combined enterprise value of approximately $58 billion. Once completed, Devon’s shareholders will own approximately 54% of the new company, while Coterra’s shareholders will hold the remaining 46% on a fully diluted basis.

This merger is not only a strategic alignment of two highly complementary companies, but it also signals a commitment to operational excellence and shareholder value creation. The transaction, unanimously approved by the boards of both companies, is expected to close in the second quarter of 2026, contingent on regulatory approvals and customary closing conditions, including shareholder approvals from both Devon and Coterra.

Transformative Leadership in the Shale Industry

The combined entity will retain the name Devon Energy, headquartered in Houston, while maintaining a strong presence in Oklahoma City. Clay Gaspar, president and CEO of Devon, emphasized the significance of this merger, stating that the combination creates a diverse asset base of high-quality and long-duration inventory designed to drive resilient value creation through commodity cycles.

Similarly, Tom Jorden, chairman, CEO and president of Coterra, expressed confidence in the merger, noting that it enhances the Delaware Basin position and combines two companies with complementary cultures rooted in operational excellence, capital discipline and data-driven decision-making. The merger also promises to strengthen the combined company's position in the Delaware Basin, one of North America's premier shale plays.

Strategic Benefits of the Merger

Creating a Premier Shale Operator: This merger results in the creation of one of the world’s largest and most influential shale operators. The pro forma third-quarter 2025 production for the combined entity will exceed 1.6 million barrels of oil equivalent (Boe) per day, including more than 550,000 barrels of oil per day and 4.3 billion cubic feet of gas per day. The core of this production will come from the Delaware Basin, a key asset that will drive much of the company’s value creation going forward.

The combination of Devon and Coterra will create an entity with a well-balanced and diversified product mix, positioning it to consistently deliver a resilient free cash flow profile. This robust portfolio and strategic approach will allow the combined entity to weather the volatility of commodity prices and continue to provide value to its shareholders.

Expanding Delaware Basin Footprint: The Delaware Basin is widely regarded as one of the most attractive shale formations in the world. Following the merger, the combined company will become one of the largest producers in the basin, with pro forma third-quarter 2025 production of 863,000 Boe per day, drawn from nearly 750,000 net acres in the heart of the basin. This core asset, representing over 50% of the company’s total production and cash flow, will provide more than 10 years of top-tier inventory. This includes the largest amount of sub-$40 inventory in the industry, ensuring the company’s position at the forefront of shale production for years to come.

Cost Synergies and Capital Efficiency Gains: The merger is expected to deliver $1 billion in annual pre-tax synergies by the end of 2027, with these collaborations driven by an optimized capital program, improvements in operating margins and streamlined corporate costs. The all-stock structure of the transaction ensures that shareholders from both companies will benefit fully from these synergies, positioning the combined entity for significant operational and financial success in the coming years.

AI-Driven Technological Advancements: A key differentiator of this merger is the combined technological prowess of both companies. By merging their AI capabilities, Devon and Coterra will establish a strong technology platform across subsurface, operations and enterprise functions. The use of AI-driven optimization will enhance capital efficiency, improve operational performance and enable data-driven decision-making at scale, giving the combined entity a technological edge over competitors in the shale industry.

Enhancing Shareholder Returns

Accretive to Financial Metrics: This merger is expected to be accretive to key per-share financial measures, including free cash flow and net asset value. With the realization of significant synergies and the enhancement of operational efficiencies, shareholders are expected to see improved returns in the near and long term.

After the conclusion of the merger, the combined company plans to declare a quarterly dividend of 31.5 cents per share, subject to board approval. Furthermore, the company will authorize a new share repurchase program exceeding $5 billion, offering additional returns to its shareholders.

Fortress Balance Sheet and Growth: The combined entity will have a fortress balance sheet, with a pro forma net debt-to-EBITDAX ratio of 0.9x and total liquidity of approximately $4.4 billion as of Sept. 30, 2025. This strong financial foundation, coupled with enhanced economies of scale, will lower the company's cost of capital and position it well for growth and shareholder value creation.

Governance and Leadership Structure

Following the merger, the new company's board will consist of 11 members, with six directors from Devon and five from Coterra. Clay Gaspar will serve as president and CEO, while Tom Jorden will assume the role of non-executive chairman of the board. The combined leadership team, which will draw on talent from both Devon and Coterra, will be based in Houston.

Advisors to the Transaction

The transaction has been supported by several prestigious financial and legal advisors. Evercore is serving as financial advisor to Devon, while Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the financial advisors to Coterra, with Goldman Sachs also providing a fairness opinion. Gibson, Dunn & Crutcher LLP is the legal advisor to Coterra.

Conclusion: A Shale Powerhouse Emerges

The merger between CTRA and DVN is a landmark moment for the shale industry, creating a leading operator with world-class assets, cutting-edge technology and a strong financial foundation. The combined company’s leadership in the Delaware Basin, along with cost synergies, capital efficiency and AI-driven technological advancements, positions it for continued success. This merger offers substantial value creation for shareholders, setting the stage for long-term growth and leadership in the shale energy market.

CTRA's Zacks Rank & Key Picks

Currently, CTRA and DVN have a Zacks Rank #3 (Hold) each.

Investors interested in the energy sector might look at some better-ranked stocks, TechnipFMC plc FTI and Oceaneering International OII, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TechnipFMC is valued at $22.54 billion. FTI is a global leader in energy projects, technologies and services, specializing in subsea, onshore, offshore and surface solutions for the oil and gas industry. TechnipFMC is known for its integrated engineering, procurement, construction and installation model, which helps clients reduce project costs and accelerate delivery.

Oceaneering International, a Houston, TX-based oil and gas equipment and services company, is valued at $3 billion. The company is a global provider of engineered services and products to the offshore energy, aerospace and defense industries. Oceaneering International specializes in underwater robotics, remotely operated vehicles and subsea engineering solutions for offshore oil and gas exploration and production.

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