Devon Energy's bold merger and AI-driven gas deals reshape its future

Devon Energy (DVN) has unveiled major moves to strengthen its position in the energy market. The company announced a merger with Coterra Energy (CTRA) and secured long-term gas supply deals tied to rising AI-driven power demand. Meanwhile, analysts are scrutinising its contrasting financial performance against high-flying peers like Constellation Energy (CEG).

Devon's production has climbed steadily from around 580,000 barrels of oil equivalent per day (boe/d) in 2021 to roughly 680,000 boe/d in 2025. This 17% growth outpaced rivals like ExxonMobil and Chevron, which saw flat or modest increases over the same period. The company's focus on the Permian Basin has driven efficiency, aligning with surging energy needs from AI data centres—projected to push US power demand up by 160% by 2030.

The firm's financials have also improved sharply. Free cash flow hit $3.1 billion in 2025, a significant jump from prior years, with its market cap now at about $28.7 billion. Shareholders will benefit further once the all-stock merger with Coterra closes in Q2 2026. Devon's investors will hold around 54% of the combined entity, while the quarterly dividend will rise 31% to $0.315 per share. A new $5 billion share buyback programme will also launch post-merger. On the supply side, Devon has locked in two major agreements. A 7-year deal will deliver 65 million cubic feet (MMcf) of gas daily to a proposed 1,350 MW power plant from 2028, catering to AI electricity demand. Additionally, a 10-year LNG export contract for 50 MMcf per day, starting in 2028, will provide steady cash flows. Contrastingly, Constellation Energy (CEG) has faced volatility despite its AI-powered growth narrative. Its stock has dropped 18% year-to-date from January's high, even after a 13% revenue boost in Q4. The company trades at 41 times trailing earnings, with a market cap near $109 billion, despite a 38% decline in full-year net income to $2.3 billion. Wall Street remains divided on whether its nuclear-focused strategy justifies such valuations.

Devon's merger and long-term contracts position it to capitalise on AI's energy demands. The dividend hike and buyback plan signal confidence in future cash flows. Meanwhile, Constellation's premium valuation faces pressure as earnings lag behind market expectations.