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Devon Energy unveiled its first outlook as a combined company following the completion of its merger with Coterra Energy, projecting 2026 production of approximately 1.38 million barrels of oil equivalent per day (boe/d) and outlining plans to return up to 70% of free cash flow to shareholders.

The Oklahoma-based producer said oil output is expected to average around 500,000 barrels per day next year, while total capital spending is forecast at roughly $4.9 billion. More than 60% of that investment will be directed toward the Permian Basin, reinforcing the region's role as the company's primary growth engine.

Devon plans to operate 31 drilling rigs and 10 completion crews in 2026, bringing between 460 and 480 net wells online. Management said the development program has been optimized to maximize free cash flow generation rather than pursue aggressive production growth.

The guidance comes just weeks after Devon completed its merger with Coterra, creating one of the largest independent U.S. exploration and production companies. Chief Executive Officer Clay Gaspar said integration efforts and portfolio optimization are proceeding with urgency as the company evaluates opportunities to concentrate its asset base around its premier Permian position.

A major focus for investors will be synergy realization. Devon said it expects to capture $600 million in merger-related synergies during 2027 and remains on track to achieve a $1 billion annual pre-tax synergy run rate by the end of that year. The company cited operational best-practice sharing, capital efficiency gains, margin improvements, and corporate cost reductions as key drivers.

Devon also highlighted its shareholder return framework, which includes a fixed quarterly dividend of $0.32 per share and an existing $8 billion share repurchase authorization. The company intends to maintain an investment-grade balance sheet and expects to retire approximately $1.25 billion of debt in 2026.

The combined company's production portfolio spans the Permian Basin, the Rockies, Eagle Ford, the Anadarko Basin, and Marcellus Shale. Under its 2026 capital allocation plan, the Permian will receive approximately $2.9 billion, significantly more than any other operating region.

The merger reflects a broader consolidation trend across the U.S. shale sector, where producers have increasingly pursued scale, inventory depth, and operational efficiencies to enhance free cash flow generation and shareholder returns amid commodity price volatility. Devon's outlook suggests management is prioritizing balance sheet strength and capital discipline while integrating one of the industry's largest recent combinations.

By Charles Kennedy for Oilprice.com

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