Devon is a high FCF, diversified energy platform with lower volatility and slightly lower margins

Copilot creates this clean, structured pro‑forma model for Devon + Coterra, built with realistic assumptions from the data we gathered and typical upstream modeling logic.

Copilot’ll keep it analytical (like a buy-side memo) and explicit about assumptions so you can tweak it.

🛢️ Devon + Coterra Pro-Forma Model

1. Base Case (Standalone → Combined)

Production (2025–2026 run-rate)

• Devon: ~385k BOE/d [investors....oterra.com]
• Coterra: ~650–780k BOE/d [devonenergy.com], [stocktitan.net]

👉 Combined: ~1.05–1.15 million BOE/d

Commodity Mix (approx.)

• Devon: oil-heavy (~60–70% liquids)
• Coterra: gas-heavy (~55% gas) [devonenergy.com]

👉 Pro-forma mix (estimate):

• Oil + liquids: ~50–55%
• Gas: ~45–50%

✅ This is a major shift: from oil-beta → balanced energy exposure

Cost Structure

• Devon: ~$9/BOE [matrixbcg.com]
• Coterra: ~$8–9/BOE [stocklight.com], [stocktitan.net]

👉 Combined cost: ~$8.5–9/BOE

Free Cash Flow (baseline)

• Devon: ~$3.1B FCF [energyadvisors.com]
• Coterra: ~$2.0–4.0B FCF (range) [finance.yahoo.com], [monexa.ai]

👉 Combined base FCF: ~$5–7B

Synergies

• Target: ~$1B annually [energyadvisors.com]

👉 Adjusted FCF: ~$6–8B steady state

2. Combined Reserves Life

Devon

• ~2.2B BOE proved reserves [ogj.com]

Coterra (inferred range)

• Production scale + multi-basin depth 👉 Implies ~1.5–2.0B BOE (typical for its size — inferred)

Combined reserves estimate:

👉 ~3.7–4.2B BOE

Reserve Life Index (RLI)

Formula:

RLI = Reserves / Annual production

• Production: ~1.1M BOE/d → ~400M BOE/year

👉 RLI ≈ 9–11 years

✅ Interpretation:

• Solid but not exceptional for shale
• Requires continuous reinvestment (expected in shale model)

3. FCF Sensitivity Model (Key Driver)

Assumptions

🔁 Sensitivity Table (FCF vs Prices)

A. Oil sensitivity (hold gas constant)

👉 Approx: +$10 oil → +$2B FCF

B. Gas sensitivity (hold oil constant)

👉 Approx: +$1 gas → +$1.5–2B FCF

✅ Insight:

• Pre-merger → oil dominated
• Post-merger → dual sensitivity
  • Oil + Gas both matter significantly

4. Synergy-Adjusted Valuation

Step 1: Enterprise Value

Approx combined EV:

• Devon EV ≈ ~$60B
• Coterra EV ≈ ~$30–35B

👉 Combined EV ≈ ~$90–95B

Step 2: EBITDA / FCF multiples

Base case

• FCF: $6.5B
• EV/FCF ≈ 14–15x

With synergies

• FCF: $7.5B

👉 EV / FCF ≈ 12–13x

Step 3: Upside via re-rating

Peers (top shale):

• EV/FCF: ~10–12x
• EV/EBITDA: ~4–6x [last10k.com]

Valuation scenarios

✅ Key takeaway:

• Current valuation already discounts mid-cycle oil
• Upside = commodity + execution (synergies)

5. Investment Interpretation

✅ Strength of combined company

• Top-tier cost structure (~$8–9/BOE)
• Balanced oil + gas exposure
• Massive FCF generation ($6–8B)
• Strong shareholder returns potential

⚠️ Structural constraints

• RLI ~10 years → reinvestment mandatory
• Commodity-driven valuation (no secular growth premium)
• Gas dilutes oil margins (but adds stability)

🎯 Final Insight (Most Important)

👉 The merger transforms Devon from:

Before:

• High FCF, oil-beta, cyclical

After:

• High FCF, diversified energy platform
• Lower volatility, slightly lower margins

✅ Investment Conclusion (from model)

• Best case: strong oil + moderate gas → significant upside (20–30%)
• Base case: fair value / slight upside
• Bear case: highly exposed to commodity downside

👉 This is fundamentally a "leveraged cash-flow machine" tied to commodity prices.