US shale producer Devon Energy enters merger with WPX Energy

US-based independent natural gas and petroleum exploration company Devon Energy and peer WPX Energy have entered an all-stock merger of equals transaction.

The deal is expected to create an energy company with a combined market value of around $12bn.

The new entity will be named Devon Energy. It is expected to become one of the largest energy producers in the US with a production of 277,000bpd.

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 maximise 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 part of the transaction, WPX shareholders will receive 0.5165 shares of Devon common stock for each share of WPX.

The deal, which is expected to close in the first quarter of next year, will help cut costs and increase annual cash flow by $575m by the end of 2021.

It is, however, subject to customary closing conditions.

Upon its successful completion, the transaction will see Devon shareholders owning a 57% stake in the combined company, while the remaining 43% interest will be held by WPX shareholders.

Last month, Devon Energy announced plans to return $100m to shareholders after closing its Barnett Shale asset sale in October.

In March, WPX acquired Delaware Basin-based operator Felix Energy for $2.5bn.