Corporate M&A

Devon and WPX Announce ~US$12 Billion 'Merger of Equals'

By Isha Makkar
September 29, 2020
2 minutes read
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Oklahoma City-based Devon Energy Corp. and Tulsa headquartered WPX Energy Inc. have entered into an agreement pursuant which the companies will combine in an all-stock ‘merger of equals’. The transaction has been unanimously approved by the boards of directors of both companies.

The merger will create a leading unconventional oil producer with an acreage position focused on the core of the Delaware basin, and an enterprise value of approximately US$12 billion. The combined entity will be named Devon Energy. The transaction marks the second largest upstream oil & gas M&A deal announced globally this year, following Chevron Corp.’s planned ~US$13 billion acquisition of Noble Energy Inc. announced in July.

Under the terms of agreement, WPX shareholders will receive a fixed exchange ratio of 0.5165 shares of Devon common stock for each share of WPX common stock owned. Upon completion, Devon shareholders will own approximately 57% of the combined company, with WPX shareholders owning approximately 43% on a fully diluted basis. Funds managed by private equity firm EnCap Investments LP own approximately 27% of the outstanding shares of WPX and have entered into a support agreement to vote in favor of the transaction.

The combined will be listed on the New York Stock Exchange (NYSE) and hold interests across the Delaware, Anadarko, Williston, Eagle Ford Shale, and Powder River basins, with a primary focus on 400,000 new acres of Delaware basin properties. Pro forma proved reserves for the combined entity amount to approximately 1.3 billion barrels of oil equivalent (Bboe) as of December 31st, 2019 (~69% oil), with combined average daily production of approximately 532 thousand barrels of oil equivalent per day (Mboe/d) during Q2-2020.

“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. Bringing together our asset bases will drive immediate synergies and enable the combined company to accelerate free cash flow growth and return of capital to shareholders. In addition to highly complementary assets, Devon and WPX have similar values, and a disciplined returns-oriented focus, reinforcing our belief that this is an ideal business combination,” said Dave Hager, Devon’s President & CEO.

The transaction is currently expected to close in Q1-2021. JP Morgan Securities is acting as financial advisor to Devon, while Citi is advising to WPX.

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