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Illustration: Sarah Grillo/Axios

The oil-and-gas producers Devon Energy and WPX Energy are merging in a roughly $2.6 billion all-stock transaction that comes as U.S. producers are struggling with depressed prices and demand.

Why it matters: The deal between two companies active in the prolific Permian Basin of Texas and New Mexico will help create economies of scale and improved margins, they said this morning.

  • The move "accelerates Devon’s transition to a business model that prioritizes free cash cow generation over production growth," they said of the combined company, which will retain the Devon name.
  • The merger creates one of the largest shale producers in the country, with current combined production of 277,000 barrels per day.
  • Reuters and the Wall Street Journal reported on the deal over the weekend.

The big picture: Analysts have been predicting that the pandemic, combined with the already challenging economics of shale, could spur new consolidation in the U.S. oil patch.

  • In July, Chevron announced a $5 billion deal to acquire Noble Energy, though that deal wasn't just about shale — it also gave Chevron key natural gas assets in the Mediterranean Sea.

The intrigue: There’s an election angle here too.

  • Bloomberg points out that Devon has a greater share than WPX of holdings on federal lands, and Biden has vowed to curtail development in those areas.
  • “A deal with WPX would ... address Devon’s exposure to federal acreage, according to Gabe Sorbara, an analyst at Siebert Williams Shank & Co. LLC.”
  • They report that “Devon has been fielding analyst questions for months about the potential impact of a Biden presidency.”

Go deeper: Why U.S. oil production won't soar again soon

Go deeper

Amy Harder, author of Generate
Aug 6, 2020 - Energy & Environment

Coronavirus hastens Big Oil's Atlantic divide on climate change

Illustration: Aïda Amer/Axios

The pandemic is accelerating a divide between European and American oil companies over climate change and clean energy.

Why it matters: Bottom lines and investor returns will be vastly different across the corporate spectrum depending on how aggressively the world tackles climate change in the coming decades.

Dec 16, 2020 - Politics & Policy

New Mexicans could test Biden's drilling pledge

Joe Biden. Photo: Jim Watson / Getty Images

President-elect Biden is considering two New Mexicans to be Interior secretary, which could provide an early test to his promise to end new energy drilling on federal land.

Why it matters: New Mexico is a Democratic state where oil and gas production is crucial to the local economy, and the next Interior secretary — with both retiring Sen. Tom Udall and Rep. Deb Haaland in the running — will be charged with implementing Biden’s proposed ban.

Taiwan leader confirms U.S. troops on island training forces

Taiwan's President Tsai Ing-wen in Taipei earlier this month. Photo: I-Hwa Cheng/Bloomberg via Getty Images

Taiwan's President Tsai Ing-wen told CNN Thursday that a small number of American troops are on the island for training purposes and she has "faith" the U.S. would defend the democracy against a Chinese military attack.

Why it matters: This is the first time a Taiwanese leader has publicly acknowledged the presence of U.S. troops on the self-governing island since the last U.S. garrison left in 1979, when Washington switched formal diplomatic recognition to Beijing.