January 16, 2026 [Reuters]- Devon Energy and Coterra Energy are exploring a potential merger, in a deal that could create one of the largest independent U.S. shale producers, three people familiar with the matter said.

A possible combination, which would rank among the largest between U.S. energy producers in recent years, comes as U.S. crude prices ‌are pressured by a near-term global oil glut and the prospect of more supplies entering the market in the coming years from Venezuela.

The two companies are in early-stage talks for a combination, said the sources, who cautioned a transaction was not guaranteed and spoke on condition of ‍anonymity to discuss confidential deliberations.

Devon shares finished 4.2% lower, giving it a market capitalization of roughly $24 billion, while Coterra’s stock gained 1.5% to value the Houston-based company at nearly $20 billion.

Devon and Coterra did not respond to requests for comment.

ECONOMIES OF ⁠SCALE WOULD CONTROL COSTS

While energy dealmaking was subdued in 2025, versus prior record-breaking years, arguments for consolidation ‍among U.S. oil and natural gas producers remain valid. Benefits include economies of scale, which would help control costs within ‌a ‌depressed price environment for crude, as well as securing additional resources at a time when many shale basins are maturing and new prime development land is at a premium.

Both companies have operations across multiple shale formations, with both present in the Delaware portion of the Permian basin in Texas and New Mexico ⁠and Oklahoma’s Anadarko basin.

Devon ⁠also has assets in ​South Texas’ Eagle Ford play, as well as North Dakota’s Williston basin. Coterra has a significant presence in Appalachia, having been formed in 2021 through a merger of Cimarex Energy and Marcellus-focused Cabot Oil & Gas.

Coterra is facing pressure ‍from investment firm Kimmeridge Energy Management, which on November 4 went public with demands for governance and strategy changes. One of the best-known activist investors in oil and gas, Kimmeridge also owns a position in Devon, according to regulatory filings.

“We would ​be supportive of a transaction that allowed the combined company ‍to focus on their premier Delaware assets,” Kimmeridge Managing Partner Mark Viviano said. “We see material operational synergies from the enhanced scale ​and offsetting acreage positions.”