The oil patch is currently experiencing a consolidation wave, with several oil companies acquiring smaller rivals to enhance their scale, reduce costs, and boost free cash flow. After ConocoPhillips agreed to buy Marathon Oil for $22.5 billion, Devon Energy, which had been interested in acquiring Marathon, is left looking for other potential targets. Despite missing out on previous acquisition attempts, Devon is still in a position to make a strategic acquisition to increase its value in the industry.
Devon has been unsuccessful in previous attempts to acquire companies such as CrownRock and Enerplus, as they opted to merge with other competitors. Devon also held discussions with Marathon Oil before the latter agreed to a deal with ConocoPhillips. This consolidation wave in the oil industry has left fewer players in the market, with most major producers having completed acquisitions. EOG Resources, another large-scale producer, typically avoids mergers and acquisitions, making it unlikely for them to be a competitor for Devon on future acquisition targets.
With a $36 billion enterprise value, Devon is still large enough to acquire other smaller independent oil and gas producers. Potential targets for Devon include Ovintiv, Permian Resources, and Civitas Resources, which could enhance Devon’s position in key basins such as the Permian and Anadarko. Despite missing out on previous acquisition attempts, Devon still has many solid options available to consider for future acquisitions.
The Motley Fool Stock Advisor analyst team has not identified Devon Energy as one of the top 10 stocks for investors to buy now. However, the service provides guidance on building a successful portfolio, with regular updates and new stock picks each month. While Devon Energy continues to seek out potential acquisition targets, its disciplined approach ensures it does not overpay for a deal, which could prove beneficial in the long run as it faces less competition for remaining targets.
Investors considering putting $1,000 into Devon Energy should weigh the potential returns against other top stock picks recommended by the Motley Fool Stock Advisor team. Despite the company’s recent misses on acquisition targets, Devon still has the opportunity to make a strategic acquisition that could enhance its scale, reduce costs, and increase its cash flow. As the oil industry undergoes significant consolidation, Devon Energy remains poised to capitalize on the changing landscape and potentially secure a deal that benefits the company and its shareholders.
