$2.6B merger to create a shale behemoth
Devon Energy plans to acquire WPX Energy for $2.56 billion, creating one of the nation’s largest shale producers with a dominant position in the Delaware Basin of West Texas.
The two Oklahoma-based shale producers on Monday said the “merger of equals” is expected to save $575 million in costs andmake the combined company more competitive in a low oil-price environment. The all-stock merger, pending approval from regulators and by Devon and WPX shareholders, is expected to close in the first quarter of 2021. The combined company, valued at around $12 billion, will be named Devon Energy and headquartered in Oklahoma City.
“This merger is a transformational event for Devon and WPX as we unite our complementary assets, operating capabilities and proven management teams to maximize our business in today’s environment, while positioning our combined company to create value for years to come,” Devon CEO Dave Hager said.
“The combined company will be one of the largest unconventional energy producers in the U.S. and with our enhanced scale and strong financial position, we can now accomplish these objectives for shareholders more quickly and efficiently,” WPX CEO Rick Muncrief said.
Weak oil demand and low prices caused by the pandemic are pushing energy companies to join forces to weather the downturn and help bolster earnings.
Devon reported a loss of $668 million and revenue of $394 million during the second quarter.
WPX reported a loss of $408 million and revenue of $33 million during the second quarter.
Meanwhile, Chevron announced in July that it plans to acquire Houston-based Noble Energy in a $13 billion deal, scheduled for a shareholder vote next month. This new wave of consolidations is expected to create larger companies but employ fewer workers.
Devon’s acquisition of WPX would create one of the largest shale players in the U.S. with production of 277,000 barrels per day. The combined company would have 400,000 acres in the Delaware Basin spanning West Texas and NewMexico. About 35 percent of the leases are on federal land, which could be affected by a potential drilling ban if former Vice President Joe Biden were to win November’s presidential election.
The combined company also would have assets in the Anadarko Basin of WestTexas and Oklahoma,
the Williston Basin of North Dakota and Montana, the Eagle Ford Shale of SouthTexas, and the PowderRiver Basin of Montana and Wyoming.
Under the terms of the agreement, WPX shareholders will receive 0.52 shares of Devon common stock for each share of WPX common stock owned. If the deal closes, Devon shareholders would own about 57 percent of the combined company and WPX shareholders 43 percent.
Both boards of directors have unanimously approved the transaction. EnCap Investments, which owns about 27 percent of the outstanding shares of WPX, plans to vote in favor of the transaction.
Following the merger, Devon Energy would have a 12-member board of directors, consisting of seven directors from Devon and five from WPX. Hager, the current Devon CEO, will be named chairman, and Muncrief, the current WPXCEO, will be named president and CEO.