Devon-Coterra $58 Billion Tie-up Targets Large Inventory of Sub-$40 Wells

---

Written by Eric Funderburk for IIR News Intelligence (Sugar Land Texas)

---

Summary

On Monday, Devon Energy and Coterra Energy announced that they would join forces as a combined Houston-based company in a deal that values the combined enterprise at $58 billion. The merger provides the new company a large inventory of holdings requiring a lower breakeven oil price.

---

The Deal

Shale players Devon Energy and Coterra Energy announced their intended merger on Monday. The company will retain the Devon name but will be headquartered in Houston, Texas, rather than the Devon's current Oklahoma City headquarters, although the company has said it will retain "a significant presence" in the city. The transaction is expected to close in the second quarter of 2026.

Devon Chief Executive Officer Clay Gaspar will remain head of the company while Coterra Chief Executive Tom Jorden will become a non-executive chairman.

According to the terms of the agreement, Coterra shareholders will receive 0.7 shares of Devon for each Coterra share they hold, which Reuters values at $21.4 billion, creating a combined $58 billion enterprise.

What the Deal Does

• Production - While the company will have assets in the Marcellus, Rockies, Oklahoma and South Texas, its bread and butter is in the Permian Basin of West Texas and New Mexico, where the enlarged Devon will hold nearly 750,000 acres of often overlapping leases. Bloomberg points out that these adjacent holdings will allow the company to drill longer horizontal wells. All of which leads to...


• Cost Efficiencies - Devon and Coterra said the transaction will be targeting "the realization of $1 billion in annual pre-tax synergies" by the end of 2027. Among the planned savings are those from "an optimized capital program" and "streamlined corporate costs." While the companies haven't announced any reductions in their workforces, the overlapping acreage and potential overlapping job roles could result in redundancies. Artificial intelligence (AI) also was mentioned. After touting their combined AI abilities, the companies' press release noted that "AI-driven optimization will enhance capital efficiency, operational performance, and decision-making at scale."

Lower-Cost Wells

And the combined company also is seeking savings in its drilling programs, with apparently good reason. The companies claim the new Devon will hold the industry's largest inventory of wells that can produce profitably in the per-barrel price range in the $40s.

And while oil in the $40s may be a bit low for what seems to be in store in the near future, producers are, in fact, bracing themselves for lower prices. Both the Paris-based International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) are forecasting a surplus of oil on the market this year, and while forecasts change with each monthly report, the agencies are currently pegging a 3.7 million to 4 million barrel-per-day (BBL/d) surplus this year, bringing with it lower oil prices and the possibility that many producing wells, for example those operating in the Permian, will not be able to break even in regard to profit.

The EIA projects Brent crude oil, currently trading at $65-$66 per barrel, will average $56 per barrel this year, while West Texas Intermediate (WTI), currently trading in the low-$60s, could average $51 per barrel in 2026. In December, the Dallas Federal Reserve's latest survey reported producers saying that new wells drilled in the Permian Basin required an average break-even price of $62. However, this figure drops significantly to cover expenses for existing Permian wells, with the average response for continuing operations netting a profit at $35 per barrel.

But new wells have to be drilled. Compared to conventional wells, shale wells provide strong initial production but experience much more rapid production declines on a much quicker basis. Devon and Coterra, with such a large amount of holdings with a low break-even price, seem set to weather a low-price environment better together than alone, particularly if they are able to streamline activities into longer horizontal drilling and fewer wellheads.

Potential Synergies

While it's too early to say how consolidation of the two companies will resolve, there is some room for speculation. Industrial Info's Global Market Intelligence (GMI) Production Project Database shows a Devon Energy exploration and drilling program this year and continuing into 2027 in Lea County, New Mexico, resulting in around 89 new wells this year and perhaps more than 140 in 2027.

But Lea County happens to be where Coterra acquired 49,000 net acres early last year and is targeting between 400 and 550 net locations. Whether such holdings might prove contiguous to Devon's operations remains to be seen, but the possibility of this or other overlapping locations leading to some synergistic opportunities seems strong, leading to those coveted lower-production-cost barrels.

Key Takeaways

• Devon Energy and Coterra Energy have announced a merger, creating a $58 billion shale oil & gas company.
• The combined companies' largest holdings will be in the Permian Basin of West Texas and New Mexico.
• With lower oil prices seemingly looming, the larger Devon will hold what it claims to be the industry's largest inventory of sub-$40 wells.

---

About IIR News Intelligence
IIR News Intelligence is a trusted source of news for the industrial process and energy markets, powered by Industrial Info Resources' Global Market Intelligence (GMI).

About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 250,000 current and future projects worth $30.2 Trillion (USD).