American oil and gas companies Devon Energy Corp (NYSE: DVN). and WPX Energy Inc. are negotiating a merger, writes The Wall Street Journal, citing informed sources.
Devon and WPX, which own shale assets in the Permian Basin, are discussing a deal in the form of an exchange of shares, which will lead to the creation of a company with a capitalization of about $ 6 billion. The market value of Devon is $ 3.4 billion, WPX – about $ 2.5 billion.
According to the sources, the companies may approve the deal this week. The merger is expected to help them survive a period of low energy prices, strengthen their market position and reduce costs.
Experts have previously predicted a wave of mergers and acquisitions in the sector, as small and medium-sized oil and gas companies, including Devon and WPX, have performed rather weakly in recent years, while investors are demanding more stable profits and cash flows from them.
Nevertheless, M&A activity in the oil and gas industry remains low, writes WSJ. Buyers are not ready to pay large premiums to the market price of companies, and sellers are not ready to part with assets after a significant decrease in their value.
The largest oil deal in the industry since the start of the coronavirus pandemic was the acquisition of oil company Chevron Corp (NYSE: CVX). rival Noble Energy Inc (NASDAQ: NBL). for $ 5 billion
Devon and WPX, like other shale companies, are suffering serious losses from the coronavirus pandemic and are forced to slash costs amid falling oil prices.
Devon's capitalization exceeded $ 50 billion at its peak in 2008, amid the shale boom. Two years ago, it was more than $ 8 billion.