Coterra Energy (CTRA.US) is in talks to merge with Devon Energy Corporation (DVN.US), brewing a mega merger in the oil and gas industry.

According to sources familiar with the matter, Coterra Energy (CTRA.US) is exploring the possibility of merging with Devon Energy Corporation (DVN.US). If these two shale oil and gas exploration companies successfully join forces, it will be one of the largest oil and natural gas transactions in recent years. The aforementioned sources stated that both companies hold a large number of assets in the oil and gas-rich Permian Basin and are in discussions regarding a potential merger. They also revealed that one of the proposals being discussed is an all-stock transaction. Boosted by this news, Coterra Energy's stock price surged 12% at one point on Thursday. By the end of the trading day, the stock had narrowed its gains to 1.46%, closing at $25.73, with a market value of approximately $19.6 billion. Devon Energy Corporation's current market value is around $23 billion. The sources indicated that the two companies are still negotiating the terms and structure of a potential deal. It is currently uncertain whether the negotiations will lead to a final agreement, and the possibility of other competing bidders cannot be ruled out in the future. Some sources also added that Coterra Energy had recently engaged in merger discussions with at least one other company. Representatives from Coterra Energy and Devon Energy Corporation did not immediately respond to requests for comment. This merger talks highlight how oil and gas industry giants are urgently pushing for industry consolidation after a relatively quiet year for mergers and acquisitions in 2025. With international oil prices stable around $60 per barrel, industry leaders like Chevron Corporation (CVX.US) and Exxon Mobil Corporation (XOM.US) are busy digesting the huge acquisition projects they had previously completed. It is worth noting that the business models of Devon Energy Corporation and Coterra Energy are unique both companies hold significant assets in various shale basins in the United States, while companies like Permian Resources (PR.US) and Diamondback Energy (FANG.US) are more focused on a single core production area, which is often preferred by investors. Adjacent asset advantage Similar to other large oil and gas mergers in the United States in recent years, the core objective of this potential deal is to further expand operations in the Delaware and Midland basins in West Texas and New Mexico. These basins are the largest and highest-producing oil and gas fields in the United States. Devon Energy Corporation's fast-growing acreage in the Delaware Basin's Delaware sub-basin, which covers approximately 400,000 net acres, and Coterra Energy's land holdings in the region also amount to 346,000 acres. Once merged, the new company will have stronger capabilities to compete with giants like Exxon Mobil Corporation and Diamondback Energy in the Delaware Basin. Analyst Vincent Piazza stated in a research report released on Thursday, "The main advantage of this potential merger is to expand operations in the Delaware sub-basin. However, both companies have diversified asset portfolios in multiple regions of the U.S. and also operate in the natural gas sector, which means that post-merger, asset integration and streamlining will be necessary." Scott Hanold, an analyst at Royal Bank of Canada Capital Markets, stated in a report to investors that if the merger goes through, Devon Energy Corporation will be the surviving entity. He also mentioned that some assets in the Anadarko and Appalachian regions may be considered for integration and streamlining. Oil and gas companies tend to engage in transactions in adjacent regions due to the benefits of integrated operations, drilling longer horizontal wells, and improving operational efficiency to achieve revenue growth. In addition to the core areas, Devon Energy Corporation has drilling operations in the Rocky Mountains, southeastern Texas, and Oklahoma, while Coterra Energy's business footprint covers western Oklahoma and the Marcellus shale gas production area in Pennsylvania. This potential deal bears some resemblance to a transaction from last year at that time, Civitas Resources (CIVI.US) acquired SM Energy (SM.US) for $12 billion. The commonality between the two deals is that both companies are mid-sized oil and gas companies with significant assets in the Permian Basin, as well as operations in other shale basins. Coterra Energy itself is a product of mergers and acquisitions, resulting from the merger of Cimarex Energy Co. and Cabot Oil & Gas Corp. in 2021. The logic behind the merger of Cimarex Energy, mainly focused on the oil business, and Cabot Oil & Gas, primarily focused on the natural gas sector, had puzzled analysts. As one of the most aggressive investors in the U.S. oil and gas industry, Kimmeridge Energy Management Co. has been pressuring Coterra Energy to push for changes such as restructuring the management team. It is worth noting that this institution is also a shareholder of Devon Energy Corporation. Mark Viviano, Managing Partner at Kimmeridge Energy Management Co., stated in a statement that the institution will "support" the merger between Coterra Energy and Devon Energy Corporation, as it will enable both companies to focus their resources on the assets in the Delaware sub-basin. He also pointed out that the merger could create "significant operational synergies." Viviano added that if an attractive deal cannot be reached, Coterra Energy will need to pursue changes to drive transformation.