Private investment firm Kimmeridge Energy Management Co. LLC called for Devon Energy Corp. to pursue asset sales and enact a more "decisive, shareholder-focused" strategy upon the closing of the company's pending acquisition of Coterra Energy Inc.
In preparation for the acquisition that is expected to close May 4, Kimmeridge released an open letter on April 28 to the future board of Devon Energy, stating that Devon should articulate its post-merger strategy and provide investors with clarity on strategic direction, capital allocation and performance metrics.
"Investors need to understand not just what assets the company owns, but why it owns them, how capital will be allocated, and what return thresholds guide decision-making," Kimmeridge said in a news release. Kimmeridge said that while Devon has a high-quality set of core positions, the company has allocated capital to assets that dilute shareholder returns and "obscure the underlying value of its premier acreage."
Kimmeridge, an activist investor in the energy sector, holds a 1.42% stake in Devon, according to S&P Global Market Intelligence data.
The investment firm urged the Devon board to streamline its portfolio following the merger closing by initiating an accelerated program of noncore asset divestitures. "A streamlined portfolio focused on high-margin, scalable assets will not only improve capital efficiency, but also position Devon as a best-in-class operator that is deserving of a premium valuation multiple," Kimmeridge said.
Devon and Coterra announced on Feb. 2 the signing of a definitive agreement to merge in an all-stock transaction, creating what the companies' management described as a "large-cap shale powerhouse" with an estimated $61 billion in combined enterprise value.
Both companies have large operations in the Permian and Anadarko basins. The new company, which will retain the Devon Energy name and be based in Houston, will be one of the largest producers in the Delaware Basin. Devon said the combined company will have pro forma third-quarter 2025 production exceeding 1.6 million barrels of oil equivalent per day, including more than 550,000 boe/day and 4.3 billion cubic feet of natural gas per day.
The post-merger board is to be comprised of six directors from Devon and five from Coterra.
Coterra has previously faced pressure from Kimmeridge to focus exclusively on the Permian and exit its gas-weighted assets in the Marcellus Shale and Anadarko Basin.
The combined company plans to issue full-year 2026 guidance following the merger's closing. Devon's first-quarter earnings call is scheduled for May 6.
