Devon Energy to acquire WPX Energy for £1.99 billion

In an announcement on Monday, Devon Energy Corp (NYSE: DVN) said it intends to buy WPX Energy Inc (NYSE: WPX). The agreement will be valued at £1.99 billion and will help Devon expand its footprint in the prolific shale field located in Delaware.

The U.S. oil and gas producer’s bid for WPX stands at £3.55 per share that represents a 2.7% premium on the price at which WPX closed the regular session on Friday. WPX Energy published its earnings report for the second quarter in the last week of July.

WPX Energy, however, jumped over 12% in premarket trading on Monday to £3.76 per share that suggests its shareholders want Devon to extend a higher bid. WPX Energy has recovered roughly 125% since March when it printed a year to date low of £1.64 per share. At the start of the year, it had a per-share price of a sharply higher £10.65.

Devon expects the transaction to be completed in Q1 of 2021

Devon-WPX merger marks the second in the U.S. oil and gas industry this year after the Coronavirus pandemic weighed heavily on the global oil prices. In July, Chevron Corp acquired Noble Energy Inc. in an all-stock deal valued at £3.89 billion.

Devon expressed confidence on Monday that the transaction was likely to be completed next year in the first quarter. The acquisition, it added, will help minimise costs and result in a £447 million boost to its annual cash flow by the end of 2021.

The combined company, as per Devon, will have a production capacity of 227 thousand BPD (barrels of oil per day) and its acreage position in Delaware will stand at 400 thousand net acres. Devon forecasts £9.33 billion of enterprise value for the combined company, in which it will have a 57% ownership stake.

Devon’s CEO will be the chairman of the combined company

As per the agreement, shareholders of WPX will get 0.5165 of Devon shares (common stock) for each WPX common share they owned. CEO Dave Hager of Devon Energy Corp will serve the new company as its chairman while chairman Rick Muncrief of WPX will take on the role of its President and Chief Executive.

Devon was reported about 9% up in premarket trading on Monday. On a year to date basis, shares of the company are now 65% down in the stock market. Interested in investing in the stock market online? Here’s a simple guide to get you started.

At the time of writing, Devon Energy is valued at £2.74 billion.