Devon Energy Touts “Transformative” Coterra Merger, Targets $1B Synergies and $5B+ Buyback

Devon Energy NYSE: DVN and Coterra Energy outlined the rationale and expected benefits of their announced all-stock merger during a joint conference call, describing the deal as a “transformative” combination intended to create a larger, more durable U.S. shale operator with increased scale, a stronger balance sheet, and a greater ability to return cash to shareholders.

Deal thesis: scale in the Delaware Basin and a “must-own” portfolio

Coterra Chairman, CEO and President Tom Jorden said the transaction creates a “powerful new E&P company” defined by asset quality, scale, capital efficiency, operational excellence, and “a relentless emphasis on technology and innovation.” Jorden emphasized that the merger aims to create “a better company,” not only a larger one, and highlighted commodity and geographic diversity as tools to navigate volatile oil and gas markets.

Devon President and CEO Clay Gaspar, who is expected to lead the combined company as president and CEO, said the merger creates a “clear path to superior value creation” that neither company could achieve independently. Gaspar described the combined company as a “premier shale operator” with substantial positions across major U.S. basins, anchored by a leading position in the Delaware Basin that he said will generate more than half of total production and cash flow.

Production scale, assets, and Delaware footprint

Gaspar said the combination would create one of the world’s largest shale producers, with more than 1.6 million barrels of oil equivalent per day of production on a pro forma basis. He argued that this level of scale enables operational and financial advantages such as supply chain purchasing power, improved marketing and infrastructure optimization, and elimination of corporate redundancies.

In the Delaware Basin specifically, Gaspar said the combined company would have approximately 750,000 net acres of stacked-pay resource across Southeast New Mexico and Texas, with production exceeding 860,000 barrels of oil equivalent per day. He added that the Delaware position would be supported by more than a decade of drilling inventory at the current pace of development and nearly 5,000 gross drilling locations, including a high concentration of sub-$40 break-even inventory.

Gaspar also noted that the combined company would maintain a broader multi-basin portfolio that could provide resilience and optionality, while stressing that assets outside the Delaware would need to “compete for capital” under a disciplined allocation process that could include asset rationalization.

$1 billion annual synergy target and execution plan

Management said the deal is expected to generate $1 billion in annual pre-tax synergies by year-end 2027. Gaspar characterized the opportunities as actionable and supported by a detailed execution plan, and said the net present value of synergies is approximately 20% of the pro forma market capitalization on a PV-10 basis.

The company broke the synergy target into three areas:

• $350 million in annual savings from capital optimization, including reallocation of capital, supply chain improvements, longer laterals, and the application of best practices.
• $350 million in annual savings tied to operating margins, including streamlined field operations, infrastructure leverage (particularly in the Delaware), and integrated technical expertise.
• $300 million in annual corporate cost reductions through elimination of redundancies and consolidation of duplicate functions.

During Q&A, Gaspar said some capital-related savings could materialize relatively quickly, including within the first six months after closing, while other elements would take longer. He also referenced an “18-month focus” to fully achieve the $1 billion target and said both teams want to beat the goal “in quantity as well as time.”

Gaspar also clarified that Devon’s legacy business optimization program would continue and that the merger synergies described are “above and beyond” the work each company has already been doing independently.

Capital returns, balance sheet, and shareholder framework

Gaspar said the pro forma company is expected to have enhanced free cash flow generation and an improved investment-grade balance sheet, which he said should lower the future cost of capital. He cited pro forma financial metrics including $4.4 billion in liquidity, 0.9x net debt to EBITDAX, and an estimated reinvestment rate below 50%.

On shareholder returns, management said the combined company plans to declare a quarterly dividend of $0.315 per share and target consistent dividend growth through the cycle. Gaspar also said the company expects a new share repurchase authorization “in excess of $5 billion,” while noting that final decisions would be made by the pro forma board.

Technology, AI, and integration; headquarters in Houston

Gaspar said technology and artificial intelligence would be “foundational” to integration and synergy capture, citing applications across subsurface modeling, drilling and completions, and production operations. He said the combined data sets and technical capabilities are expected to support improved well placement, reduced nonproductive time, improved artificial lift efficiency, and faster capital allocation decisions.

In response to a question about governance and location, Gaspar said the combined executive team would relocate the headquarters to Houston, while maintaining a “very significant presence” in Oklahoma City.

On portfolio strategy, Gaspar said leadership plans to review capital allocation across all basins after closing and indicated the company would remain flexible in assessing “core versus non-core” assets. He said joint-venture partnerships in the Delaware and Midcontinent are not expected to change. He also acknowledged potential upside in the Anadarko Basin from overlap and operational synergies, but said it was too early to signal a major shift in capital allocation there.

Jorden, addressing whether Coterra evaluated alternatives, said the company considered a “full range” of opportunities and concluded the Devon combination was “the best one by far,” citing value creation for both shareholder bases and exposure to upside.

About Devon Energy NYSE: DVN

Devon Energy Corporation NYSE: DVN is an independent oil and gas exploration and production company headquartered in Oklahoma City, Oklahoma. The company focuses on the exploration, development, production and marketing of hydrocarbons, including crude oil, natural gas liquids (NGLs) and natural gas. Devon operates as an upstream energy company that acquires, evaluates and develops onshore resource plays using a combination of drilling, completion and production optimization techniques.

Core business activities include identifying and developing energy reserves, operating well programs and managing reservoir performance to generate production and cash flow.

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