On Monday, it was announced that Devon Energy and Coterra Energy will merge, with an expected close in the second quarter of this year. This merger will create one of the largest U.S. shale producers with a pro forma enterprise value of ~$58B, production of ~1.6M BOE/d, and proved reserves of `4.5B BOE. You can see their joint presentation (1) for the benefits of the merger for Devon and Coterra . I would like to focus on the consequences of this merger for two companies closer to my heart (and investment portfolio) – LandBridge and WaterBridge. WaterBridge, and by extension LandBridge, should be a major beneficiary with this merger.
Post-Close Management
First, let’s take a look at the management of Coterra and Devon. After a period of managing produced water internally, Devon has opted to use third parties to manage its produced water. In 2024, Devon contributed 18 produced water handing facilities and ~210 miles of pipeline to a joint venture with WaterBridge. This ultimately led to Devon’s current ~15% ownership stake of WaterBridge. Subsequently, Devon struck a 10-year surface use and pore space agreement with LandBridge, to secure 300,000 bpd of pore space for future use. Coterra still prefers to manage produced water internally. It is worth noting that Coterra has had some issues managing produced water internally. It dealt with some shut-ins in the Culberson-Reeves Seismic Response Area given seismic activity stemming from deep disposal wells and it recently had some shut-ins in Culberson County due to the over pressurization of shallow disposal wells interfering with oil wells.
Coterra still has its own water transportation and disposal assets (2). Privileging the disposal of produced water internally as opposed to externally on legacy Coterra properties will likely change for two reasons. First, Devon’s CEO will be the CEO of the combined company. Second, even if the first point was not the case, given the combined company’s ownership stake in WaterBridge, there is an economic incentive to send business to WaterBridge, and by extension LandBridge.
Areas for Growth
Let’s start with taking a look at the combined Devon / Coterra footprint and WaterBridge’s operating assets.
Let’s start from the left side of the Coterra/Devon footprint and work our way to the right side.
Lea County: The first circle covers Lea County, NM. This is the sour gas (see Landman Season 2 Episode 3) region where Coterra owns a lot of acreage. This should be developed shortly. It runs right through WaterBridge’s Speedway project. To service it, WaterBridge will build Speedway 2. They have softly announced it during the Q3 2025 earnings call. I would expect an “open season” announcement any day now.
Reeves County: The largest of the two circles in Reeves County shows ample Coterra acreage. Looking at the WaterBridge chart to the right shows that the Coterra acreage is in a high-pressure area. Meaning that there will not likely be any incremental water disposal available there and that the water will need to be moved and disposed of out of that area. The map on the right also shows that WaterBridge has assets close to that area and can easily service it. The smaller circle on the west side of Reeves County shows that Coterra has some acreage that can be easily serviced by WaterBridge’s BPX Kraken project. It is probably easier to see this in the below picture.
Culberson County: The final circle shows Coterra’s massive position in Culberson County. This is the area where Coterra had shut-ins due to issues with both deep and shallow injection wells. Looking at the picture immediately above, it shows that it does not appear to be too hard for WaterBridge to service this area and take water out of Culberson County. WaterBridge already has some pipelines that connect Culberson County to the BPX Kraken Project.
Acquisition Opportunities: As discussed, WaterBridge already acquired some water disposal assets from Devon. In the merger announcement call, Devon/Coterra management discussed the subject of asset divestiture. Given the close relationship WaterBridge has with Devon, it makes sense that WaterBridge would be in a good position to pick up legacy Coterra’s water assets, should WaterBridge have an interest.
Finally, the merger should provide some solace to WaterBridge shareholders, and perhaps quiet the bears, as the the combined company has a strong inventory of oil that has a sub $40 per barrel break-even price, which means that new production should occur, even if oil prices continue lower.
Overall, the Devon / Coterra merger brings a lot of acreage near WaterBridge’s assets and provides an economic incentive for those assets to utilize WaterBridge’s services. This should help drive volumes for the coming years for both WaterBridge and LandBridge.
Exhibits
1) https://s2.q4cdn.com/462548525/files/doc_presentations/2026/DVN-CTRA-Merger_Presentation_020226.pdf
2) https://s28.q4cdn.com/696626308/files/doc_financials/2024/ar/Coterra_2024-Annual-Report.pdf
Disclaimer: For entertainment and informational purposes only. This is not a solicitation to buy or sell any security. Do your own due diligence.