Kimmeridge on Tuesday urged shale producer Devon Energy’s incoming board to swiftly pursue asset sales, improve capital allocation and revamp executive pay to boost shareholder returns after its merger with Coterra Energy closes.
Investment firm Kimmeridge, a well-known activist investor in the energy sector, holds about a 1.4% stake in Devon, according to LSEG data.
Kimmeridge said the combined company risks a “conglomerate discount” unless it streamlines its business and focuses on high-margin assets, even as the deal creates scale and free cash flow potential.
The deal, announced in February and expected to close on May 4, will create a giant U.S. shale producer with an enterprise value of about $58 billion.
Devon and Coterra did not immediately respond to Reuters’ request for comment.
Kimmeridge urged Devon to quickly outline its post-merger strategy, including clear priorities on capital allocation, asset ownership and return thresholds.
It also called for an “accelerated” divestment of non-core assets, saying a more focused business would improve capital efficiency.
“Scale alone does not create value, but discipline and execution do,” Managing Partner Mark Viviano said in an open letter to the future board.
Kimmeridge also pressed for changes to executive compensation, recommending fully performance-based incentives.
(Reporting by Arunima Kumar in Bengaluru; Editing by Leroy Leo)