According to sources familiar with the matter, U.S. Permian Basin oil and gas giants Coterra Energy Inc. (CTRA.US) and Devon (DVN.US) are engaged in advanced merger negotiations. If successful, this would rank as one of the largest mergers and acquisitions (M&A) transactions in the global oil and gas sector in recent years. Sources indicate that the two energy giants could announce a deal within the coming days. The sources added that no final decisions have been made, the timing could change, and the negotiations might still fall apart. The transaction would strengthen their market-leading position in the Permian Basin of West Texas and New Mexico, giving them greater scale to compete more effectively with rivals like Exxon Mobil. On Thursday, buoyed by the positive M&A news, Coterra's stock price rose as much as 4.6% on the New York Stock Exchange, boosting the company's market capitalization to approximately $22 billion. Devon's stock price climbed up to 3.7%, pushing its market value to around $26 billion. The latest discussions between the two companies signal that after a relatively sluggish 2025, major U.S. oil and gas drillers are eager to consolidate resources through mergers. The deal would bolster their dominance in the Permian Basin—the United States' largest and most productive oilfield—with the combined entity achieving a larger scale to better compete with formidable Permian rivals like Exxon Mobil Corp. (XOM.US) and Diamondback Energy Inc. (FANG.US). "Permian Basin assets are the central focus of any proposed transaction," stated Vincent Piazza, a senior analyst at Bloomberg Intelligence. Gas-rich assets in the Appalachian region and elsewhere are not considered critical issues. "Due to diversified assets making it difficult to present a clear narrative to investors, streamlining and consolidating the highest-quality resources is the most viable path," Piazza added. Devon holds rights to approximately 400,000 net acres in a rapidly expanding drilling area of the Permian Basin known as the Delaware Basin; Coterra also holds a significant position of 346,000 acres in the same region. Furthermore, Coterra possesses substantial assets in the Marcellus Shale. Kimmeridge Energy Management Co., a long-time vocal investor in the sector which holds stakes in both companies, has expressed support for a potential merger, believing it would allow the combined company to focus on its prime Permian Delaware Basin assets. A merger represents a favorable outcome for both parties, driven by slower M&A activity in 2025, scarcer high-quality inventory, and the increasing importance of cost control, prompting leading North American Permian shale E&P companies to consolidate. Devon's disclosed production mix is approximately 47% crude oil, 27% natural gas, and 26% NGLs, indicating a more liquids-weighted profile. Coterra's operational disclosures show a larger actual natural gas production volume, though the company repeatedly emphasizes its "balanced oil and gas" portfolio; thus, from a commodity perspective, the merger would represent a comprehensive integration of high-quality Permian oil and gas assets from both sides. Both companies hold "massive, scalable" core positions in the Delaware sub-basin of the Permian Basin, classifying them as top-tier Permian shale oil players; however, Devon is more "Permian-centric," while Coterra is a multi-basin portfolio company, with the Permian being just one of its core asset pieces. Coterra is clearly a composite E&P with Permian, Marcellus, and Anadarko assets, allowing capital allocation flexibility across different commodities and basins. Although Devon is a multi-basin operator, its Delaware position is one of its most core scale assets (approximately 400,000 net acres). Therefore, this potential large-scale merger is viewed as operationally and logically positive for both companies. The overlap in the Delaware Basin fundamentally represents the strongest source of business synergy: larger contiguous acreage, more unified development pacing, cost dilution for infrastructure, procurement, surface engineering, and completion crews, and greater scale to compete intensely with North American energy giants like Exxon and Diamondback; institutional investors generally see the "scale and efficiency derived from overlapping Delaware assets" as the primary logic for the merger.
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