Is a super merger in shale oil coming? Coterra is considering a marriage with Devon Energy, and the stock price once rose over 10%
The U.S. shale oil industry may see a large merger deal, as Coterra Energy is considering a merger with Devon Energy, with negotiations still uncertain. If an agreement is reached, it would become one of the largest oil and gas transactions in recent years, enhancing competitiveness with industry giants after the merger. Coterra's stock price rose by more than 10% at one point, while Devon's stock price fell by 4%. This deal aims to expand scale in the Permian Basin and improve operational efficiency
The U.S. shale oil industry may be on the brink of a new wave of large-scale merger and acquisition transactions.
According to reports on Thursday, the 14th, Eastern Time, Coterra Energy is exploring a merger proposal with Devon Energy, and the two companies are negotiating the terms and structure of a potential merger, one option being an all-stock transaction.
Sources indicate that the negotiations are not yet certain, and an agreement may not be reached, with other bidders potentially emerging. Recently, Coterra has also engaged in merger talks with at least one other company. Representatives from Coterra and Devon did not immediately respond to requests for comment.
If Coterra and Devon reach an agreement, it would become one of the largest oil and gas transactions in recent years. Both companies hold significant oil and gas assets in the Permian Basin, and a merger would enhance their ability to compete with giants like ExxonMobil.
This transaction highlights the desire of oil and gas industry giants to accelerate consolidation after a relatively calm period in 2025. Currently, oil prices are stable at around $60 per barrel, while large companies like Chevron and ExxonMobil are digesting recent large acquisitions.
Following the news of the potential acquisition of Devon, Coterra's stock price surged during Thursday's trading, approaching a daily high of $28.50 near midday, with an intraday increase of 12.3%. It subsequently gave back most of its gains, narrowing the midday increase to within 2%, with a market capitalization of around $19.7 billion. Devon Energy's stock price fell more than 4% at midday, with a market capitalization still exceeding $20 billion.
Integration of Adjacent Assets in the Permian Basin
Similar to other large U.S. oil and gas transactions in recent years, the core of this potential deal lies in expanding scale in the Permian Basin. This basin, located in West Texas and New Mexico, is the largest and highest-producing oil field in the United States.
Devon owns approximately 400,000 net acres in the rapidly growing Delaware Basin area of the Permian, while Coterra holds 346,000 acres in the same region. A merger would enable the combined company to better compete with Permian giants like Exxon and Diamondback Energy.
Oil and gas companies favor transactions involving adjacent assets because they can improve efficiency and increase revenue through operational integration and drilling longer horizontal wells. Devon also has drilling operations in the Rocky Mountain region, Southeast Texas, and Oklahoma, while Coterra's other operations cover the western part of Oklahoma and the natural gas region of the Marcellus Shale in Pennsylvania.
Continued Trend of Mid-Sized Company Consolidation
This potential transaction is similar in some ways to last year's acquisition of SM Energy by Civitas Resources for $12 billion, which also involved two mid-sized companies with significant assets in the Permian Basin and operations in other basins The uniqueness of Devon and Coterra lies in the fact that both have significant assets in multiple shale basins in the United States, while industry favorites like Permian Resources and Diamondback Energy often focus on a single large block—this is generally more favored by investors.
Coterra was formed in 2021 through the merger of Cimarex Energy and Cabot Oil & Gas. At that time, analysts were puzzled by the logic of the merger between oil-heavy Cimarex and gas-focused Cabot. One of the most active oil and gas investors in the U.S., Kimmeridge Energy Management, has been pushing for changes at Coterra, including a leadership change. The firm also holds shares in Devon.
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