Devon Energy to buy shale peer WPX for US$2.56 billion in Delaware push

Devon Energy to buy shale peer WPX for US$2.56 billion in Delaware push

U.S. shale producer Devon Energy Corp said on Monday it would buy peer WPX Energy Inc in an all-stock deal that would create a combined company worth around US$12 billion.

A WPX Energy natural gas drilling rig in Parachute, Colorado
FILE PHOTO: A WPX Energy natural gas drilling rig in Parachute, Colorado, December 10, 2014. REUTERS/Jim Urquhart

REUTERS: U.S. oil and gas producer Devon Energy Corp said on Monday it will buy Permian basin peer WPX Energy Inc for US$2.56 billion as it looks to scale up its presence in the Delaware portion of the prolific shale field.

The deal values WPX at US$4.56 per share, just 2.7per cent higher than the stock's closing price on Friday.

WPX shares surged more 12per cent in premarket market trading to US$5, well above the per share price implied in the Devon merger, suggesting shareholders expect a higher offer.

Deals at little or no premium are becoming the norm in the oil and gas industry as producers seek out combinations to tide out a coronavirus-induced slump in demand and a crash in prices of hydrocarbons.

Devon's deal is the second major merger in the troubled industry following the price shock in April when crude oil briefly traded in negative territory. In July, Noble Energy Inc agreed to be acquired by Chevron Corp for US$5 billion in stock.

Devon said the deal, which is expected to close in the first quarter of 2021, will help cut costs and improve its annual cash flow by US$575 million by end of next year.

Tudor, Pickering and Holt analysts said the deal creates material scale in the Delaware while significantly cutting costs.

Devon said the combined company will hold an acreage position of 400,000 net acres in the Delaware and will have a capacity of producing 277,000 barrels of oil per day.

It will own 57per cent of the combined company, which will have an enterprise value of around US$12 billion..

WPX shareholders will receive 0.5165 shares of Devon common stock for each share of WPX common stock owned.

Devon Chief Executive Officer Dave Hager will serve as the executive chairman of the combined firm, while WPX's chairman Rick Muncrief will be its president and CEO.

Reuters first reported the merger talks between the two on Saturday.

(Reporting by Shruti Sonal in Bengaluru; Editing by Saumyadeb Chakrabarty and Arun Koyyur)

Source: Reuters

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