The new combined entity is expected to become one of the largest unconventional energy producers in the US with a production of 277,000 barrels per day
US shale producer Devon Energy and rival WPX Energy have signed an agreement to combine in a merger of equals, creating an energy company with a combined market value of about $12bn.
The new entity, which will be named Devon Energy, is expected to become one of the largest unconventional energy producers in the US with a production of 277,000 barrels per day.
It will have an asset base supported by a premium acreage position in the economic core of the Delaware Basin, US.
Devon president and CEO Dave Hager said: “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.”
As per the terms of the deal, WPX shareholders will receive a fixed exchange ratio of 0.5165 shares of Devon common stock for each share held.
Devon shareholders to own 57% in the combined company
Subject to completion of the deal, Devon shareholders will own 57% stake in the combined company while the remaining 43% interest will be held by WPX shareholders, on a fully diluted basis.
Planned to be completed in the first quarter of 2021, the transaction is subject to customary closing conditions, including shareholders approvals from Devon and WPX.
Devon Energy said that the combined company will benefit from higher free cash flow, enhanced scale, improved margins, and the financial strength through an industry-first “fixed plus variable” dividend strategy.
WPX chairman and CEO Rick Muncrief said: “This merger-of-equals strengthens our confidence that we will achieve all of our five-year targets outlined in late 2019.”
Last year, Devon Energy agreed to divest its Barnett Shale assets to an affiliate of Kalnin Ventures’ investment vehicle BKV Oil & Gas Capital Partners for $770m.