The Daley Note

Devon Energy (DVN) and Coterra Energy (CTRA) will merge to create a top 10 US producer with a combined enterprise value of $58B. The latest mega-deal in the oil patch will target $1B in annual synergies, leaving quite a few midstream names exposed to reduced spending.

The producers announced the all-stock transaction last Monday (Feb. 2). Under the deal, DVN will own ~54% of the combined company, which will retain the Devon name and ticker. Executives expect to close the deal by 2Q26.

The merger creates a top independent producer with operations in six major US basins. The companies have a combined 750,000 acres in the Delaware Basin, as well as assets in the Marcellus, Anadarko, Eagle Ford, Powder River and Williston basins.

The Delaware will be the “crown jewel” for the merged portfolio, Devon President and CEO Clay Gaspar said during an investor call. The Permian operations account for more than half of the total production and cash flow for the combined company, he said.

Upstream consolidation has been a key driver behind falling US rigs counts, and the DVN-CTRA announcement looks to continue that trend. Devon said it aims to generate $1B in annual pre-tax synergies by YE27 from the combination, including around $350MM from reduced capital spending and supply chain benefits and $350MM in improved margins from streamlined field operations.

Investors and analysts can use the tools in East Daley Analytics’ Energy Data Studio to screen for midstream assets at risk from the DVN-CTRA combo. The two figures, available in the “Producer to System Analysis” dashboard, show historical rig activity by basin and G&P system for the two producers.

Devon and Coterra have been running a total of 32 rigs so far in 2026, down from a recent peak of 40 rigs in March 2025, according to producer data in Energy Data Studio. CTRA in early February was using 13 rigs on seven G&P systems in the Delaware, Marcellus and Anadarko. DVN has deployed 19 rigs so far in 2026, spread across 12 G&P systems in the Delaware, Bakken, Anadarko, Eagle Ford and Powder River basins.

Management has provided few clues on how it will proceed with spending cuts once the DVN-CTRA merger is finalized. Given the breadth of the producers’ operations, the focus on the Delaware could lead to cutbacks in more marginal basins, meaning the Bakken, Anadarko, Eagle Ford and Powder River programs could be in the crosshairs. Alternatively, the high-grading of operations in the Permian could result in less drilling on several midstream systems.

East Daley’s review finds little overlap between the two producers’ Delaware Basin operations. Coterra is served by five G&P systems in the Delaware owned by Energy Transfer (ET), Kinetik (KNTK), MPLX and Targa Resources (TRGP). Devon uses six G&P systems in the basin, including Delaware assets owned by Enterprise Products (EPD), ET, Phillips 66 (PSX), TRGP and Western Midstream (WES). DVN also jointly owns a G&P system with Howard Energy Partners in the Delaware.

In terms of drilling concentration, MPLX’s Delaware system is most exposed to potential cuts. Coterra currently accounts for 6 of the 8 rigs (75%) East Daley is tracking on the MPLX system. The ET – Delaware asset is also potentially exposed; Devon is running 4 of the 12 rigs on the ET system currently (33%).

See the “Producer to System Analysis” dashboard to learn more. Tools like these in Energy Data Studio give East Daley’s clients a leg up in identifying downstream risks from ongoing consolidation in the oil patch. – Alec Gravelle and Andrew Ware Tickers: CTRA, DVN, EPD, ET, KNTK, MPLX, PSX, TRGP, WES.