Devon Pledges to Engage With Interested Buyers as Shares Fall 1.4%
Key Facts
TCIM said on November 6 that Devon Energy’s lead independent director had confirmed the company would engage with parties interested in buying it in full, whether or not they submitted an offer. That signals a willingness to discuss a potential sale if a prospective buyer initiates contact, not the announcement of an existing offer or the start of a sale process. The company’s position came after it completed its strategic review and concluded that not selling additional assets was its best course. TCIM said it was disappointed with the outcome and was seeking to maximize shareholder value. Devon shares, meanwhile, fell 1.4% at 1:16 p.m. in New York on November 6, according to Bloomberg’s trading data.
TCIM said it was confident there were parties interested in buying the company in full and willing to pay a significant premium, and urged the board to honor its commitment to engage with them. Kimmeridge also pressed for a sale, arguing that retaining assets in the Anadarko, Marcellus and Rockies weakens Devon’s strategic focus. Mark Viviano, a Kimmeridge executive, said a sale of the entire company should be on the table. The firm added that describing assets outside the Permian Basin as “complementary” does not make them strategic, and that, in its view, the description reflects the board’s reluctance to make difficult decisions that unlock shareholder value. These remain shareholders’ positions, while Devon said its review concluded that it should not sell additional assets.
Chief Executive Officer Clay Gaspar said discussion of potential asset sales was distracting and putting pressure on employees, who might wonder whether their assets were up for sale. But he said the company was open to opportunities that create shareholder value. Gaspar said Devon had received proposals from industry parties, adding that some people who reached out had tried to exploit the circumstances for their own benefit. “We’ve heard from everybody in the industry: ‘Hey, Clay, my old friend, let me help you with this.’” Gaspar stressed that the company was not a forced seller, amid a divergence between management’s position and shareholders’ calls to sell the company or other assets.
Devon completed its portfolio review after integrating Coterra, saying the work included rigorous internal analysis, multiple third-party perspectives and shareholder feedback. The company views its assets outside the Permian as complementary to its portfolio, while Kimmeridge says that characterization does not establish a strategic rationale for keeping them. The acquisition of Coterra closed in May, making the combined company a $55 billion entity with a strong focus on the Permian Basin. According to data compiled by Bloomberg, Kimmeridge held less than 1% of Devon as of June 30, while Toms said it was among the company’s top five shareholders. These disagreements show that the portfolio review has not ended debate over the asset mix or the path the company should take.
Devon reported on November 5 that its production reached 1,668,000 barrels of oil equivalent per day in the third quarter, with operating cash flow of $2.8 billion and adjusted free cash flow of $2.0 billion. The company posted net income of $1.0 billion, or $0.88 per diluted share, while adjusted core earnings reached $1.6 billion, or $1.42 per share. The results provide financial context for the debate over capital allocation and shareholder returns, as investors remain divided over whether to retain or sell assets. Devon shares rose 17% year to date through November 6, according to Bloomberg. That performance, however, lagged the 38% growth in the energy sector of the S&P 500 over the same period.
For next year, Devon expects oil production growth of between 1% and 3%, with oil production of about 525,000 barrels per day and total production of about 1,600,000 barrels of oil equivalent per day. The company estimates capital spending at about $5.3 billion after accounting for the sale of Eagle Ford assets. It agreed to sell those assets for $4.2 billion in cash, with the transaction expected to close in early 2027. Devon estimates net proceeds of about $3.5 billion after taxes and effective-date adjustments, and intends to direct them toward share repurchases and debt reduction. It also plans to allocate about 75% of capital spending to the Permian in 2027, compared with about 63% in 2026.
Devon expects share repurchases to exceed $1 billion in the fourth quarter of 2026, with further acceleration in 2027, and annual merger savings to reach about $700 million in 2027. The company said it plans to repay an additional $1.5 billion of long-term debt during 2027. In its shareholder letter, it said the post-merger portfolio review was complete, but active asset management would remain one of its pillars for enhancing value. It added that it would consider future opportunities that serve shareholders’ interests. The next near-term step is the expected completion of the Eagle Ford asset sale in early 2027, while the company has not announced a process to sell itself.