Devon Energy, WPX Energy Announce $12 Billion Merger

Marco Green
September 29, 2020

Combined, the two companies will be worth $12 billion. Devon rose to $10.04.

WPX Energy (WPX +8.8%) surges in early trading to ~$5/share, well above the price implied in the Devon Energy (DVN +4.8%) merger deal, suggesting shareholders expect a higher offer.

Such a payout plan is seen as a new model for the industry that has fallen out of favor with investors after years of poor returns.

USA shale company shareholders, frustrated after years of poor returns and missed targets, have long called for the industry to consolidate in order to cut costs, and some have advocated for low- to no-premium deals, just to get them across the finish line.

The combined company, in which Devon will own 57% stake, will hold 400,000 net acres in the Delaware Basin of West Texas and southern New Mexico, and can produce 277,000 barrels of oil per day.

The deal, which would value Tulsa, Oklahoma-based WPX at a small premium to its current share price, could be announced as soon as next week, according to one of the sources.

The merger will see the enlarged company retain the Devon name.

Buffered by reduced demand for hydrocarbons amid coronavirus lockdown measures, which helped push US crude prices briefly into negative territory for the first time earlier this year, USA oil and gas producers are seeking out combinations.

"Bringing together our asset bases will drive immediate synergies and enable the combined company to accelerate free cash flow growth and return of capital to shareholders", Devon CEO Dave Hager, who will become executive chairman, said in the statement. In July, Chevron Corp agreed to buy Noble Energy Inc for $5 billion in stock and the assumption of debt.

In a press release, WPX Energy calls it "a merger of equals" and says it creates "a leading unconventional oil producer in the U.S". "We look forward to working with the leadership teams of both WPX and Devon Energy to support them during this transition", wrote Mayor Bynum in an official statement. Much of the DE, however, is located within lands owned by the federal government, and Devon has been fielding analyst questions for months about the potential impact of a Biden presidency.

Other reports by Click Lancashire

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