Devon Energy achieves another acquisition target. Where do oil supplies come from here?

The oil field is undergoing a important wave of consolidation. Several oil companies are acquiring smaller rivals in deals that will expand their scale, reduce costs and boost free cash flow. Most of the industry The biggest players have Now secured transactions later ConocoPhillips agreed to buy Marathon oil for $22.5 billion.

Devon energy (NYSE:DVN) was reportedly interested in buying Marathon before signing the deal with ConocoPhillips. This is the latest in a series of takeover attempts in which Devon has emerged as the unsuccessful bidder.

Now that another potential takeover target is off the table, Devon He will have to look elsewhere. Here’s a look at the latest misses and Some possible alternatives that Oil company may be the next target.

Missing again

In recent months, Devon Energy has been exploring acquisition options. In October, Bloomberg reported that it was investigating the CrownRock acquisition. which was it reportedly expects a sale price of more than $10 billion.

CrownRock ultimately agreed to a $12 billion cash and stock deal Western crude oil in December. The deal will strengthen the oil giant’s position in the Permian Basin (where Devon has world-class operations) and increase its free cash flow by about $1 billion in the first year, based on $70 per barrel of oil (oil is currently closer to $80).

Meanwhile, earlier this year, Reuters reported that Devon had been approached Enerplus with a takeover offer valued at over $3 billion. But Enerplus decided to merge with I agree Energy in a cash and stock transaction that valued it at approximately $3.6 billion. The merger will create a larger-scale producer in the Williston Basin (Devon core) and will significantly increase Chord’s free cash flow.

Devon also stood his ground Again, turned off again talks with Marathon Oil conducted in recent months earlier agreed to a $22.5 billion all-stock deal in ConocoPhillips. This transaction will strengthen Conoco’s position in three major shale gas fields in the US (Permian, Williston and Eagle Ford). It will also increase free cash flow, allowing the company to return more money to shareholders. As a multi-tank manufacturer, Marathon would be an excellent strategic fit for Devon.

A game of musical chairs lasts

The wave of consolidation in the oil industry has left fewer players. Most of the largest producers have already expanded. Apart from Devon Energy, it is the only major producer that has not yet made a major acquisition EEA Resources.

However, EOG has historically avoided corporate mergers and acquisitions, preferring to grow organically through exploration and development. That’s why the $70 billion oil giant is going bankrupt enterprise value the company is unlikely to be a competitor to Devon Energy for a future acquisition target.

The story continues

With an enterprise value of $36 billion, Devon is large enough to take on the remaining smaller independent oil and gas producers not yet agreed to the merger agreement with A higher producer. Possible goals it may consider include:

• Ovintiv (NYSE:OVV): The $19.3 billion company produces oil and gas in the US (Permian, Uinta and Anadarko) and Canada (Montney). A deal for Ovintiv would strengthen Devon’s position in the Permian and Anadarko basins while diversifying its business. Ovintiv is not AND perfect competition since Devon left Canada a few years ago. However, a deal could still make sense as Devon could sell Canadian assets to strengthen its balance sheet.

• Permian resources (NYSE:PR): As its name suggests, the $15.7 billion oil company is focused on the Permian Basin. It has joined a wave of industry consolidation: Permian Resources bought Earthstone Resources for $4.5 billion last year and then made additional acquisitions in the Permian region earlier this year for $175 million. The Permian Resources transaction would significantly strengthen Devon’s already leading position in the Permian.

• Civitas Resources (NYSE:CIVI): The $11.7 billion oil and gas producer operates in Colorado’s DJ Basin and Permian Basin. It recently strengthened its position in the Permian Midland Basin with its $2.1 billion acquisition of Vencer Energy. The Civitas deal would strengthen Devon’s position in the Permian and expand its operations into the DJ Basin.

Lots of solid options stay

Devon Energy continues to falter and fall short of acquisition goals. Although many With The best options have already been removed, leaving some solid alternatives. If the company manages to find the right deal at the right price, it can join its rivals to do an acquisition that increases scale, reduces costs and increases cash flow.

In any case, Devon’s discipline means he doesn’t want to overpay for the deal Exactly to keep up with rivals. This patience may pay off in the end, because it will happen Now will face much less competition for its remaining acquisition targets.

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Matt DiLallo holds positions at ConocoPhillips. The Motley Fool owns and recommends EOG Resources and Enerplus. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Devon Energy achieves another acquisition target. Where do oil supplies come from here? was originally published by The Motley Fool