Devon Energy will take over large shale oil company in Delaware

US oil and gas producer Devon Energy Corp (N: DVN) said Monday that it would buy Permian Basin-based peer WPX Energy Inc (N: WPX) for $ 2.56 billion because of its presence in the Delaware portion of the productive shale field. The deal comes about as U.S. shale companies lose money due to weak crude oil prices and struggle to raise new capital to reschedule. However, as producers look for combinations to survive a drop in demand caused by the coronavirus, deals with little or no premiums are becoming the norm. The deal values ​​WPX at $ 4.56 per share, just 2.7% higher than the stock's closing price on Friday. WPX stocks rose 11.5% to $ 4.95 in early trading, while Devon was up 4.7% to $ 9.23. "Industry consolidation remains a critical focus, although we believe the news of a DVN / WPX combo is somewhat unexpected and could be complicated by likely shareholder votes on both sides given relatively similar market caps," Cowen analysts said. Devon's deal is the second major merger after a price shock in April. In July, Chevron Corp (N: CVX) agreed to buy Noble Energy Inc (O: NBL) for $ 5 billion. Devon said the deal, due to close in early 2021, will help cut costs and increase annual cash flow by $ 575 million by the end of next year. The combined company, in which Devon will have a 57% interest, will own 400,000 net acres in the state of Delaware and produce 277,000 barrels of oil per day. It will pay dividends based on the "fixed plus variable" strategy and will spend a rate of 11 cents per share per quarter and up to 50% of the remaining free cash flow. Such a payout plan is seen as a new model for the industry, which has fallen out of favor with investors after years of poor returns. As part of the agreement, WPX shareholders will receive 0.5165 shares of Devon common stock for each share of WPX common.