This $58 Billion Merger Is Creating the Most Unstoppable Oil and Gas Stock in America

Key Points
The all-stock DVN–CTRA merger creates a Delaware Basin heavyweight with targeted synergies that could meaningfully lift free cash flow by 2027.
A higher expected dividend and a post-close buyback authorization are central to the bull case, alongside contracted natural-gas demand that could help smooth volatility.
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Devon Energy (NYSE: DVN) has surged 26% year-to-date and 37% over the past year, and the all-stock merger with Coterra Energy (NYSE: CTRA) announced February 2, 2026, is not slowing that momentum; it is accelerating it.
The catalyst: A deal that changes the math
Since the merger announcement, Devon shares have risen 15% and Coterra shares 16%. That is the market pricing in a deal it believes in. The structure is straightforward: Devon shareholders retain approximately 54% of the combined entity, Coterra shareholders get 46%, and the combined company immediately becomes the premier independent shale operator in America with a dominant position in the Delaware Basin.
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Devon's Q4 2025 results gave investors a clean foundation to build on. The company produced 390,000 barrels of oil per day, exceeding the top end of its own guidance, while capital spending of $883 million came in 4% below midpoint guidance. Free cash flow hit $702 million for the quarter, up 12.86% year-over-year. Mizuho reaffirmed its Outperform rating following the print. Devon CEO Clay Gaspar called it plainly: "This advantaged platform will deliver higher free cash flow and enhanced shareholder returns, well beyond what either company could achieve on its own."
The forward driver: Oil at $94 and $1 billion in synergies
WTI crude has surged from $65.10 on February 26 to effectively $100 a barrel today.-a $34 move in a bit over two weeks. That price sits well above the moderate planning scenarios both companies built their deal thesis around, which means the combined entity's free cash flow projections are already looking conservative. Layer on top of that $1 billion in targeted annual pre-tax synergies expected by year-end 2027, and the forward earnings power of this combined company is substantial.
The shareholder return program is the concrete hook. Post-merger, the quarterly dividend is expected to jump 31% to $0.315 per share, up from Devon's current $0.24 quarterly fixed dividend. A new share repurchase authorization exceeding $5 billion is expected following close, further reducing share count and improving dividend yield for remaining shareholders.
The structural advantage: Basin dominance plus gas diversification
Both companies' core asset is the Delaware Basin, and their combined acreage creates a scale advantage that smaller competitors cannot replicate. Beyond oil, the combined entity holds gas marketing agreements that lock in long-term demand: 50 MMcf per day under a 10-year LNG export contract starting 2028 and 65 MMcf per day to a proposed 1,350 MW power plant under a 7-year agreement at ERCOT pricing, also starting 2028. These are not spot-market bets. They are contracted revenue streams that insulate cash flow from domestic gas price volatility.
The risk worth acknowledging
Commodity price risk is real, and the merger itself carries integration and closing risk-Devon's share repurchase program is suspended until the deal closes, expected in Q2 2026.
But with WTI now near $100, Coterra's Q4 EPS miss already looks like ancient history. The combined entity's scale, synergy capture, and locked-in gas contracts mean the momentum will continue even if oil retreats modestly from current levels. For investors researching income-focused energy equities, the combined entity's scale, synergy targets, and contracted gas revenue streams represent key factors to evaluate in any due diligence process.
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Austin Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.