MW There's another big oil-and-gas merger, but shareholders aren't happy
By Tomi Kilgore
Devon to buy Coterra in an all-stock deal, as the companies look to increase scale so they can compete with larger rivals in the Permian Basin
Devon plans to acquire Coterra in an all-stock deal, as consolidation within the oil-and-gas sector continues.
Coterra Energy is being acquired by Devon Energy, but shares of both companies are falling in early Monday trading, as the implied purchase price is below where the stock last closed.
The oil-and-gas companies said the all-stock merger implies a combined enterprise value of $58 billion, with Devon $(DVN)$ shareholders set to own 54% of the combined company and Coterra $(CTRA)$ shareholders to own 46%. The deal aims to give the combined company the scale needed to compete with larger rivals.
The merger comes as a part of a wave of consolidation in the energy industry, including Chevron's $53 billion deal to purchase Hess, which closed last year; and Exxon Mobil's $60 billion deal to buy Pioneer Natural Resources, which closed in 2024. There was also Devon's $5 billion deal to buy Grayson Mill Energy, which closed in 2024.
Under the terms of the deal, Coterra shareholders will receive 0.70 Devon shares for each Coterra share they own. Based on Friday's closing price of Devon shares at $40.21, the deal values Coterra shares at $28.15, which is 2.4% below Friday's close of $28.85.
At Friday's close, Oklahoma-based Devon's market capitalization was $25.22 billion and Texas-based Coterra's was $21.97 billion.
Coterra's stock slumped 2.5% in premarket trading, while Devon shares shed 2.4%.
Investors in the acquiring companies don't usually like stock deals, because issuing new shares to fund the purchase dilutes their holdings, meaning they now own a smaller percentage of the company.
The pricing, which is at a discount, comes after both stocks saw sharp increases in January, as the bitter cold that swept through most of the U.S. sent natural-gas prices soaring. Coterra shares had jumped 9.6% in January, and Devon's stock climbed 9.8%. Coterra's stock also got a bit of a boost last week after the Financial Times reported a deal was close.
Devon's stock has rallied 17.9% over the past 12 months, while Coterra shares have gained 4.1% through Friday, while continuous natural-gas futures (NG00) have climbed 16.8% and the S&P 500 index SPX has advanced 14.9%.
After the deal closes, Devon shareholders will own 54% of the combined company, while Coterra shareholders will own the rest.
The companies said they expect synergies, or merger-related savings, of $1 billion per year. "This will drive higher free cash flow and greater shareholder returns beyond what either company could achieve alone," said Devon Chief Executive Clay Gaspar.
Before the merger announcement and after the FT report, Wedbush analyst Michael Piccolo wrote in a note to clients that the deal would strengthen both companies' positions in the Permian Basin of West Texas and New Mexico, specifically in the Delaware basin.
Piccolo wrote that the deal would give the companies the scale they need to compete with rivals, such as Exxon Mobil (XOM) and Diamondback Energy (FANG).
-Tomi Kilgore
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(END) Dow Jones Newswires
February 02, 2026 08:50 ET (13:50 GMT)
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