Devon Energy Corp.’s greatest opportunity right now is by going at it alone, Rick Muncrief, the E&P’s CEO, said on Nov. 8.

Bloomberg reported last month that Permian producers Marathon Oil Corp., Devon and privately held CrownRock might merge. Since then, Reuters reported CrownRock might be bought by ConocoPhillips.

Since then — and now joined by Devon — the companies' top brass has stuck to a familiar script: M&A isn’t off the table, but the companies are happy with what they already have.  

ConocoPhillips’ president and CEO Ryan Lance said in an earnings call on Nov. 2 that the company is sticking to its 10-year plan and “remains steadfast in our returns-focused value proposition and cost-to-supply principles, which creates a high bar for M&A.”

Marathon’s president and CEO Lee Tillman said in an earnings call that same morning that “any transaction of scale is going to have to tick all of the boxes.”

Analysts on the Marathon call noted the company’s Oct. 25 regulatory filings —amended on Oct. 30 to correct errors—included changing the company’s bylaws. Tillman said, “Let me just put to rest any of the noise created on the 8-K. We had not updated our corporate bylaws since back in 2016. This was just some cleanup on those bylaws … There’s nothing more to it than that.”

On Devon’s Nov. 8 earnings call, Muncrief told analysts that “right now, we see one of the greatest, most clearcut opportunities [to increase shareholder value] is just [by] ourselves with our share repurchases.

“And so that’s how we’re looking at it.”

Muncrief does expect more industry consolidation, though, and “we’ve been on record as saying we support continued consolidation in the sector. We think it’s the right thing to do for investors.”

But “as far as Devon’s participation … we’re going to have a high bar, be very disciplined and be very thoughtful and make sure we can sell that to shareholders—that it’s the right thing to do.”

Devon Energy Asset Overview
(Source: Devon Energy November 2023 investor presentation)

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Announced E&P deals recently include Exxon Mobil Corp.’s planned acquisition of Pioneer Natural Resources and Chevron Corp.’s deal to buy Hess Corp.

J.P. Morgan Securities analyst Arun Jayaram reported in October after the Marathon/Devon/CrownRock rumor surfaced that “a better tact would be for Devon to regain investor confidence and its relative multiple through sound execution [of existing plans] before pursuing larger scale M&A.”

Devon shares have underperformed this year compared with the XOP Index, he added.

Doug Leggate, analyst with Bank of America, asked in Devon’s call on Nov. 8, “Why not just take the variable [dividend] off the table?”

Devon’s share price “hasn’t had any value recognition for that whatsoever,” he said.

Jeff Ritenour, Devon CFO, said, “It’s pretty clear that the equity price is disconnected from the fundamentals of our business and, moving forward in the near term, we’re going to lean in on the share repurchases and … that could have an impact on the variable dividend going forward.

“But I don’t want to exclude it as an option for us because, frankly, we think it’s a key component of continuing to deliver cash returns to shareholders. But without a doubt, our bias is going to be towards share repo here in the near term.”

Hart Energy examined Devon’s returns performance dating to Jan. 4, 2021. Adding price improvement and dividends, returns on investment totaled 224% through mid-September 2023.