Devon Energy Eyes Major Acquisitions in US Shale for Scale

Devon Energy Corp., a leading oil and gas company based in Oklahoma City, is reportedly exploring major acquisition targets as it aims to expand its presence in the US shale industry, according to anonymous sources familiar with the matter. The company has held preliminary discussions in recent months with Marathon Oil Corp. regarding a potential combination. Similarly, Devon has also expressed interest in CrownRock LP, a privately held company active in the Permian Basin, the largest and most productive oil field in the United States.

The potential combination with Marathon Oil Corp. is considered complementary, as both companies operate in several basins in the Midwestern US, including Oklahoma, Texas, and New Mexico. Marathon Oil Corp., with a market value of approximately $17.5 billion, could provide Devon with the scale it seeks to achieve. Meanwhile, CrownRock LP, which has been actively looking for a buyer, could potentially be valued at over $10 billion if a sale were to proceed.

However, it is important to note that no final decision has been made, and Devon Energy could choose not to pursue either target. As of Wednesday, Devon Energy’s shares rose by 0.3% to close at $50.08 in New York trading, resulting in a market value of about $32 billion. It should be noted that the company’s stock has experienced a year-to-date decline of approximately 19%. In contrast, Marathon Oil Corp.’s shares rose as much as 4.6% in post-market trading, while Devon Energy’s shares fell by as much as 2.8%.

Representatives for Devon Energy and Marathon Oil Corp. have declined to comment on these potential acquisition talks, while there has been no response from CrownRock LP regarding inquiries. In recent news, CrownRock LP was reportedly preparing to explore a sale, as reported by Reuters.

The potential merger ambitions of Devon Energy highlight the current trend of consolidation in the US shale industry, as companies strive to increase their drilling inventory and reduce costs. Investors are also eager to witness mergers in the sector, as it allows companies to save money by combining forces and creating contiguous drilling positions. Notably, Chesapeake Energy Corp. is reportedly considering acquiring rival natural gas producer Southwestern Energy Co., while Exxon Mobil Corp. recently agreed to acquire Pioneer Natural Resources Co. for approximately $60 billion, marking the largest deal of the year.

As one of the largest independent shale explorers in the US, Devon Energy has a notable presence in five US basins, primarily the Permian Basin. A successful acquisition of either Marathon Oil Corp. or CrownRock LP would represent Devon Energy’s most significant deal since its $2.6 billion takeover of WPX Energy in 2021.

(Updates trading information in the fifth paragraph).

Source: Bloomberg News