Coterra Energy Calls Devon Merger “Transformational,” Targets $1B Synergies and $5B+ Buybacks

Devon Energy and Coterra Energy (NYSE:CTRA) used a joint conference call to outline their announced merger, describing the transaction as an at-market, all-stock deal intended to create a larger-scale U.S. shale operator with a concentrated position in the Delaware Basin and a broader multi-basin portfolio.

Executives frame merger as “transformational”

Coterra Chairman, CEO, and President Tom Jorden opened the call by emphasizing that the combination is intended to create “a bigger company, but importantly, a better company,” citing asset quality, scale, capital efficiency, operational overlap, and a focus on technology and innovation. Jorden said he would serve as chairman of the combined board, while Devon President and CEO Clay Gaspar will lead the organization as president and CEO.

Gaspar said the merger creates “a clear path to superior value creation that neither company could achieve independently,” pointing to overlapping positions in top U.S. shale basins and what he described as aligned cultures built around operational excellence and disciplined capital allocation.

Delaware Basin highlighted as the core asset

Gaspar repeatedly emphasized the Delaware Basin as the centerpiece of the combined company. He said the merged portfolio will generate more than half of total production and cash flow from the Delaware Basin, supported by more than a decade of top-tier drilling inventory at the current development pace.

According to Gaspar’s presentation remarks, the combined company will have:

• Approximately 750,000 net acres in the Delaware Basin across Southeast New Mexico and Texas
• Pro forma Delaware Basin production of more than 860,000 barrels of oil equivalent per day, representing more than half of total production and cash flow
• Nearly 5,000 gross drilling locations and what he called the highest concentration of sub-$40 break-even inventory in the sector

Gaspar also cited overlap that could improve operational flexibility and infrastructure utilization, including water handling, processing capacity, and firm takeaway. In response to an analyst question about longer laterals, Gaspar said the opportunity exists in “some of the best rock in the whole basin” and suggested the number of wells could be in the range raised by the analyst, while noting it is “not a huge number.”

Synergies targeted at $1 billion annually by year-end 2027

A major focus of the call was the companies’ synergy target. Gaspar said the combined company expects to deliver $1 billion in annual pre-tax synergies by year-end 2027, adding that the net present value of the synergies represents approximately 20% of the pro forma market capitalization on a PV-10 basis.

Gaspar broke the $1 billion target into three areas:

• $350 million from capital optimization, including supply chain savings and operational improvements enabled by asset overlap
• $350 million from operating margin improvements, including streamlined field operations and infrastructure-related efficiencies
• $300 million from corporate cost reductions through eliminating redundancies and consolidating functions

He said the companies have identified “specific actionable opportunities” supported by a detailed execution plan and highlighted that Devon and Coterra have track records of exceeding synergy targets in prior mergers. Gaspar also clarified that the $1 billion synergy estimate is above and beyond Devon’s existing business optimization program and Coterra’s ongoing efforts, rather than including them.

When asked about timing and the composition of the synergy target, Gaspar said some capital allocation-related changes could occur relatively quickly, potentially within the first six months after close, while other benefits may take longer. He referenced an “18-month focus” to fully achieve the $1 billion target and said management intends to “beat that goal in quantity as well as time,” with updates expected on a quarterly basis.

Capital returns, leverage, and balance sheet metrics

Gaspar described enhanced free cash flow generation as a key benefit of the pro forma company and said the companies plan to accelerate capital returns through higher dividends and a new share repurchase authorization. He said the company plans to declare a quarterly dividend of $0.315 per share and target consistent dividend growth throughout the cycle. He also said the company expects a new share repurchase authorization in excess of $5 billion, while noting the final framework will be set by the pro forma board.

He also cited pro forma balance sheet metrics, including $4.4 billion in liquidity, 0.9x net debt to EBITDAX, and an estimated reinvestment rate below 50%.

Integration approach, headquarters decision, and portfolio questions

On integration, Gaspar said a dedicated integration team led by senior leadership will be established after closing, with accountability and tracking mechanisms. He also said technology, artificial intelligence, and advanced analytics will be “foundational” to capturing synergies and improving performance across subsurface modeling, drilling and completions, and production operations.

Asked about leadership and location, Gaspar said the executive team will relocate the headquarters to Houston while maintaining a “very significant presence” in Oklahoma City, reflecting Devon’s history there and the combined company’s larger scale.

Analysts also pressed management on capital allocation outside the Permian. Gaspar said the combined team and board will revisit the capital allocation framework after closing, describing the approach as “ruthless capital allocators” with each asset needing to compete for capital. He indicated asset rationalization will be evaluated, but did not provide specific decisions regarding the Marcellus or other regions.

In response to questions about joint ventures and partnerships, Gaspar said he does not expect changes to “critical JV partnerships,” adding that scale could create additional opportunities. He also described potential upside in the Anadarko position due to overlap, shared infrastructure, and common midstream relationships, while cautioning it is too early to say whether capital allocation there will materially increase.

Jorden, responding to a question about alternatives, said Coterra had considered “a full range of opportunities,” but called the Devon combination “the best one by far,” citing value creation and “full upside” for shareholders.

About Coterra Energy (NYSE:CTRA)

Coterra Energy (NYSE: CTRA) is an independent oil and natural gas exploration and production company focused on the development, production and optimization of onshore hydrocarbon resources in the United States. The company’s operations center on the exploration, drilling, completion and production of crude oil, natural gas and natural gas liquids (NGLs), with an emphasis on maximizing operational efficiency and capital discipline across its asset base.

Its business activities include identifying and developing resource-rich acreage, operating producing wells, managing reservoir performance and marketing produced hydrocarbons to a range of midstream and energy customers.