Devon buys 16,300 Delaware Basin acres for about $2.6 billion

Devon Energy said Thursday it has acquired 16,300 net undeveloped acres in the core of New Mexico’s Delaware Basin for about $2.6 billion through a federal lease. The deal expands the U.S. shale producer’s position in the Permian Basin, the top U.S. shale play spanning West Texas and New Mexico. The purchase comes weeks after Devon closed its $58 billion merger with Coterra Energy. Some analysts said the company paid a steep price, and shares closed down about 2.5%.

Devon said the acreage adds about 400 net drilling locations normalized to two-mile laterals, implying a cost of about $6.5 million per net drilling location. Matt Portillo of TPH & Co wrote that investors could be “surprised by the sticker price,” while RBC Capital Markets analyst Scott Hanold called the figure “eye watering” versus historical mergers and acquisitions in the Permian.

Devon said the leases carry an 87.5% net revenue interest and 10-year terms across all depths. The company said those terms are more favorable and come with lower royalty burdens than typical state or private leases in the region.

Lease terms and location near existing operations

The company said the land sits next to Devon’s existing operations, allowing it to use established infrastructure and drill longer laterals. Hanold said the leases are mainly in three sections of the basin with no existing development, and one is near Devon’s best-performing asset.

Officials said the acreage is in New Mexico’s Potash Area, where oil and gas activity is generally heavily restricted to protect potash mining interests. Devon described the rock quality as strong, and the company said the location supports the economics of future development.

Funding and what the deal adds to inventory

Devon said it will fund the acquisition using cash on hand. The company reported total cash of $1.8 billion at the end of the first quarter.

The transaction adds undeveloped inventory and could shape Devon’s drilling plans in the Delaware Basin as it integrates assets following the Coterra deal.