After two years of rapid consolidation in the energy sector, dealmaking slowed sharply last year as oil prices plunged as OPEC increased its output and the Trump administration implemented a series of global tariffs. Now, with the stabilization of crude oil prices—even at low levels—M&A is making a comeback, analysts say.

The all-stock merger in near parallel created the largest oil and gas producer in the western lobe of the developing Permian Basin—the Delaware Basin in western Texas and southeastern New Mexico. It is the largest oil and gas merger in two years ever Diamondback Energy bought Endeavor Energy Resources to develop a goliath in the eastern lobe of the Permian, the Midland Basin.

The combined Devon will bring an enterprise value of $58 billion, including debt. The deal does not include a premium, valuing Coterra at about $21.5 billion, not counting nearly $5 billion in assumed debt.

The Delaware Basin accounts for more than half of Devon’s expanded 1.6 million barrels of oil equivalent produced per day, but the company also has large footprints in Oklahoma, Pennsylvania, North Dakota, Wyoming, and south Texas’ Eagle Ford Shale.

“Delaware is Coterra’s crown asset, as well as Devon’s crown asset,” said Devon CEO Clay Gaspar. luck in a telephone interview. “When you put the two together, it’s Delaware’s premier position.”

Strategically, the deal makes a lot of sense, said Andrew Dittmar, principal analyst at Enverus Intelligence Research. “It’s getting harder and harder to put these big combinations together with the amount of consolidation we’re seeing in 2023 and 2024. There aren’t many logical consolidation targets left. Investors are skeptical of these scale-for-scale deals. They really want to see operational overlaps.”

The stars aligned

Gaspar will remain CEO of Devon while Coterra CEO Tom Jorden will become non-executive chairman. Devon will move its headquarters from Oklahoma City to Coterra’s home in Houston, while promising to maintain a strong presence in Oklahoma.

“With these deals, you do it when the stars align,” Gaspar said.

In early 2021, Devon grew significantly by acquisition WPX Energyand Coterra was created later that same year through a combination of Cimarex Energy and Cabot Oil and Gas. About five years ago, the time was right for the next step change, Gaspar said. And Coterra is ready to explore its options.

“Those stars are starting to align and then, over the last few months, Tom and I have been doing the hard work to figure out how we can build something together that’s really a real integration, and it’s going to take the best from both sides,” Gaspar said.

While increasing scale and additional drilling are critical, Gaspar said, “It’s not just about getting bigger.” The operational synergies created by the Delaware Basin and Oklahoma’s Anadarko Basin are significant, he said. He and Jorden identified $1 billion in synergies by the end of 2027—$350 million from reduced capital expenditures, $350 in annual operational efficiencies, and $300 million from job cuts and corporate cost reductions.

The deal is expected to close by the end of June, giving Devon shareholders 54% of the combined company. Devon will control six of the 11 board seats.

Delaware drilling

After the deal, Gaspar said management will determine whether to “double down” or sell any of its geographic assets. “We will be ruthless providers of capital. These individual properties will have to compete.”

But the Delaware Basin will certainly remain central.

“It’s going to be a powerhouse in Delaware, which is the perfect Permian play that you want to be the center of your company if you can,” Dittmar said. “This is the highest quality rock in the Lower 48.”

While the Midland Basin is the most mature part of the Permian with the most infrastructure and low-hanging fruit, the Delaware may have the most long-term potential.

Delaware essentially offers 5 miles underground of various layers of oil and gas columns, allowing Devon and others to drill to greater depths on the same acreage for years to come.

“They always say the best place to find oil is where you’ve already found oil, and that gives us that confidence in the Delaware Basin,” Gaspar said.

“As opposed to the Midland side, Delaware is usually a little deeper. It’s a little higher pressure, may cost a little more, but the economy will stand up to anything in the US,” he added. “It’s just a fantastic winning asset.”

The Midland Basin is sometimes valued higher due to a higher percentage of more valuable crude oil compared to natural gas. However, the timing is working for Devon in the gassier Delaware with rising gas prices from increased gas exports and increase in household electricity demand in the power of the data center and AI boom.

“The gas percentage is actually a gem these days as we’ve got this incredible insatiable demand,” Gaspar said.

Having the combined acreage gives Devon more supply chain negotiating power, more land to drill higher laterals, and more leverage to do land swap deals to optimize the position going forward, Gaspar said.

Now Gaspar must move from Oklahoma to Houston, acknowledging that the headquarters change is a concession in the negotiations, albeit one that puts Devon in the nation’s largest oil and gas city.

“There’s a give and there’s a take. It’s very important to get the deal done,” he said. “When we saw the value creation of this combined company, that was something we were willing to throw on the table.”