Repeatedly missed opportunities, Devon Energy why become oil and gas mergers and acquisitions “outsiders”?

Recently, according to foreign media reports, the U.S. shale oil and gas giant Devon Energy (DVN.US) in the past year at least three missed opportunities for large-scale mergers and acquisitions, failed to acquire Marathon Oil (MRO.US), CrownRock and Enoga Energy (ERF.US) as desired. Why has Devon Energy failed so often in the midst of a wave of M&A in the oil and gas industry?

Acquisition after acquisition failed, Devon Energy became “outsiders”.

It is reported that Devon Energy lost to ConocoPhillips (COP.US) in the acquisition of Marathon Petroleum, lost to Occidental Petroleum (OXY.US) in the bidding for CrownRock, and failed to beat Chord Energy (CHRD.US) in the competition for Enoga Energy.

According to analysts, Devon Energy's losses are closely related to the poor performance of its own stock price, unattractive acquisition offers and increased competition in the industry.

Low Stock Price, Uncompetitive Takeover Offer

Over the past year, Devon Energy's stock price performance lagged significantly behind the S&P 500 Energy Index, which largely undermined the attractiveness of its acquisition.

Andrew Dittmar, principal analyst at energy consulting firm Enverus, pointed out that the weak share price performance puts Devon Energy at a disadvantage in a bidding war with competitors.

In addition, Devon Energy has been conservative in its acquisition offers. Compared with the average premium for U.S. oil and gas public companies since the beginning of 2023, Marathon Oil's and Enoga Energy's final closing price premiums were only 3 percentage points higher, suggesting that Devon Energy's offer was not sufficiently attractive.

Industry M&A heats up, competition gets fiercer

As oil and gas prices continue to rise in recent years, M&A activities in the industry have heated up significantly, with major giants expanding their scale and enhancing their competitiveness through mergers and acquisitions.

In the face of fierce competition, Devon Energy's conservative strategy is clearly not effective. In order to take advantage of the competition in the future, Devon Energy needs to review its M&A strategy, and while maintaining price discipline, it should also be bold enough to make more attractive offers to win quality assets.

Future outlook: opportunities for Devon Energy

Despite the setbacks, analysts believe Devon Energy still has the potential for future M&A deals.

Potential acquisition targets include Permian Resources (PR.US), Matador Resources (MTDR.US) and privately-held Mewbourne Oil, all of which would help Devon Energy strengthen its position in the Delaware Basin.

In addition, Devon Energy could also consider acquiring privately held Grayson Mill Energy if it wishes to strengthen its presence in the Williston Basin.

All in all, Devon Energy needs to take stock of the lessons learned and adjust its M&A strategy in order to capitalize on future competition and achieve sustainable growth.