Devon Energy and Coterra Merge in $58 Billion Deal to Create Shale Behemoth
February 2, 2026 · by Fintool Agent
Devon Energy+2.40% and Coterra Energy+4.06% announced a definitive merger agreement today that will create one of the world's largest shale producers with a combined enterprise value of approximately $58 billion. The all-stock transaction, which values Coterra's equity at $21.4 billion, represents the largest U.S. shale tie-up since Diamondback's acquisition of Endeavor Energy Resources for roughly $26 billion in 2024.
Under the terms of the agreement, Coterra shareholders will receive 0.70 shares of Devon common stock for each share of Coterra held. Upon completion, Devon shareholders will own approximately 54% of the combined company while Coterra shareholders will hold 46%.
Market Reaction
Both stocks are trading mixed today as the deal was announced, with oil prices down approximately 5%. Devon shares are up 0.6% at $40.46 while Coterra is down 1.4% at $28.44 as of mid-day trading. Since merger talks were first reported on January 15, Coterra shares have rallied approximately 11% while Devon has gained roughly 6%.
Ask Fintool AI AgentThe Strategic Rationale
The combination creates a "premier shale operator" with pro forma third-quarter 2025 production exceeding 1.6 million barrels of oil equivalent (BOE) per day, including over 550,000 barrels of oil per day and 4.3 billion cubic feet of gas per day.
"This transformative merger combines two companies with proud histories and cultures of operational excellence," said Clay Gaspar, Devon's President and CEO, who will lead the combined company. "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."
Tom Jorden, Coterra's CEO who will become non-executive Chairman of the combined board, emphasized the deal's strategic merit: "This was the best one by far. This adds tremendous value for both shareholder bases. It creates an absolutely premier company that exposes our owners to full upside."
Delaware Basin Dominance
At the heart of the combined portfolio is a leading position in the Delaware Basin, the most prolific shale play in the United States. The merged company will control approximately 750,000 net acres across Southeast New Mexico and Texas, with production exceeding 863,000 BOE per day—representing more than half of total production and cash flow.
The combined entity will hold one of the industry's deepest inventories with nearly 5,000 gross drilling locations and the highest concentration of sub-$40 break-even inventory in the sector. Management estimates more than 10 years of top-tier development opportunities at the current activity pace.
"We become a clear leader in the Delaware Basin, giving us unmatched opportunity to capitalize on our core position," Jorden noted during the conference call.
$1 Billion Synergy Target
The companies expect to achieve $1 billion in annual pre-tax synergies by year-end 2027, split across three primary categories:
| Synergy Category | Annual Savings | Key Drivers |
|---|---|---|
| Capital Optimization | $350 million | Supply chain leverage, longer laterals, best practices |
| Operating Margin Improvements | $350 million | Field operations streamlining, infrastructure optimization |
| Corporate Cost Reductions | $300 million | Redundancy elimination, favorable debt refinancing |
On a present value basis, these synergies represent approximately 20% of the combined company's market capitalization.
"Both Devon and Coterra have established track records of exceeding synergy targets in prior mergers," Gaspar emphasized. "Devon's recent business optimization program is further proof, having delivered substantial cost savings and operational improvements ahead of schedule."
Importantly, these synergies are incremental to Devon's existing business optimization program, which the company expects to continue delivering on independently until the merger closes.
Ask Fintool AI AgentTechnology and AI Integration
Both companies have been industry leaders in deploying artificial intelligence across subsurface modeling, drilling and completions, and production operations. The merger creates what management describes as an "industry-leading technology platform" that will accelerate AI deployment across the combined portfolio.
"Technology and artificial intelligence are foundational to the success of this integration," Gaspar said. "By combining our complementary technological capabilities and expansive data sets, we create an industry-leading technology platform that accelerates AI deployment across our combined portfolio."
Expected benefits include optimized wellbore placement, reduced non-productive time, improved artificial lift efficiency, and faster capital allocation decisions.
Capital Returns Framework
The combined company enters the merger from a position of financial strength with $4.4 billion in liquidity, 0.9x net debt to EBITDAX, and an estimated reinvestment rate below 50%.
Management outlined an enhanced shareholder return strategy:
- Quarterly dividend: $0.315 per share with targeted consistent growth
- Share repurchases: New authorization expected to exceed $5 billion
"When we shift over to the share buyback capabilities, think about the combined free cash flow and what that really can mean," Gaspar said. "We'll really be in the driver's seat when we think about option value on this tremendous free cash flow, sustainable free cash flow generating business."
Leadership and Governance
The combined company will retain the Devon Energy name and trade under the ticker "DVN" on the New York Stock Exchange. Headquarters will move to Houston, though the company will maintain a significant presence in Oklahoma City.
| Role | Executive | Background |
|---|---|---|
| President & CEO | Clay Gaspar | Devon's current President and CEO |
| Board Chairman | Thomas E. Jorden | Coterra's current Chairman, CEO and President |
| CFO | Shannon E. Young III | Coterra's current EVP and CFO |
The 11-member board will include six Devon designees and five Coterra designees. A two-year corporate governance policy will protect both the Chairman and CEO positions, requiring 75% board approval for removal.
Portfolio Optimization on the Horizon
Management signaled that comprehensive portfolio review will be a priority post-close, with all non-Delaware assets expected to compete for capital.
"Absolutely, first priority for the new combined management team and board is thinking about that capital allocation amongst these assets. And absolutely, asset rationalization as we think about what each of these assets mean," Gaspar said when asked about the Marcellus and other non-Permian assets.
The Anadarko Basin, where both companies have overlapping positions, could see renewed attention given operational synergies. "Anadarko is having a new day. There's been a lot of private equity excitement and investment. Certainly, with the gas build that's coming, it really helps the economics there," Gaspar noted.
Ask Fintool AI AgentTransaction Details
The merger requires approval from both Devon and Coterra shareholders. Devon shareholders must approve an amendment to increase authorized shares and approve the stock issuance, while Coterra shareholders must adopt the merger agreement.
| Term | Details |
|---|---|
| Exchange Ratio | 0.70 DVN shares per CTRA share |
| Enterprise Value | $58 billion |
| Equity Value | $21.4 billion |
| Termination Fee | $865 million |
| Outside Date | August 1, 2026 (extendable to February 1, 2027 for antitrust) |
| Expected Close | Q2 2026 |
The deal is structured as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.
What to Watch
Regulatory approval: The merger requires Hart-Scott-Rodino clearance and FTC review of the combined Delaware Basin position.
Oil price volatility: With crude prices down 5% today, commodity price fluctuations could impact the relative value proposition for both shareholder bases.
Synergy execution: Management's credibility hinges on delivering the $1 billion annual synergy target by year-end 2027.
Portfolio decisions: Watch for announcements on non-core asset dispositions, particularly in the Marcellus and other gas-weighted assets.
Capital allocation: The balance between growth investment, dividends, and buybacks will be closely scrutinized following close.