Devon Energy and Coterra Energy announced on Feb. 2 an all-stock merger that “implies a combined enterprise value of approximately $58 billion.” Skadden is repping Devon while Gibson Dunn is advising Coterra in the transaction that is expected to close by June 30.
Coterra shareholders will receive 0.70 shares of Devon common stock for each Coterra share held. The companies arrived at the implied value based on Devon Energy’s closing stock price of $40.25 on the NYSE on Jan. 30.
Upon close, Devon shareholders will own about 54 percent and Coterra shareholders will own about 46 percent of the combined entity that will be known as Devon Energy with headquarters in Houston and a significant presence in Oklahoma City. The oil and gas exploration companies said the merger will result in $1 billion in annual pre-tax synergies.
The merger creates a shale producer with pro forma third quarter production of more than 1.6 million barrels of oil equivalent a day, including over 550 thousand barrels of oil and 4.3 billion cubic feet of gas daily, according to the companies.
“We’ve now built a diverse asset base of high-quality, long duration inventory to drive resilient value creation and returns for shareholders through cycles,” Devon CEO Clay Gaspar said. He also said the anticipated annual synergies “will drive higher free cash flow and greater shareholder returns beyond what either company could achieve alone.”
Coterra CEO Tom Jorden said the merger “enhances the Delaware [Basin] and brings together two premier organizations with complementary cultures rooted in operational excellence, disciplined capital allocation, and data‑driven decision-making focused on creating per share value.”
Gaspar was named President and CEO of the new company, and Jorden will become non-executive chairman. Devon will appoint a new lead independent director to the board that will include six members from Devon and five from Coterra.
The combined company plans to declare a quarterly dividend of $0.315 a share and establish a new share buyback program in excess of $5 billion.
The Skadden lawyers who worked with Devon General Counsel Dennis Cameron on the deal include M&A partners Steve Gill, Mingda Zhao and Emery Choi in Houston, with Dohyun Kim and Elizabeth Gonzalez-Sussman in New York.
Other Skadden attorneys who advised Devon include Erica Schohn, Joseph Penko, Michael Hong, Steven Messina and Trevor Allen in New York with David Wales in Washington, D.C.
The Gibson Dunn corporate team that worked with Coterra General Counsel Adam Vela on the deal includes Houston Partners Tull Florey and Hillary Holmes and New York Partner Andrew Kaplan. Of Counsel Jonathan Sapp in Dallas, associates Mary Boci and Kyle Ezring in New York and Hunter Michielson in Houston also worked on the merger.
Other Gibson lawyers in the Houston office who advised Coterra include Rahul Vashi, Gregory Nelson, Nathan Sauers and Shalla Prichard. Krista Hanvey worked on the deal from Dallas with John Curran in New York, and Joshua Lipton and Alexander Merritt in Washington.
Coterra engaged Goldman Sachs and JPMorgan Securities as financial advisors for the transaction, and Devon Energy’s financial advisor is Evercore.