Form 424B3 DEVON ENERGY CORP/DE

November 24, 2020 4:33 PM
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-249859

JOINT PROXY STATEMENT AND PROSPECTUS

 

LOGO   

LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Stockholders of Devon Energy Corporation and WPX Energy, Inc.:

On behalf of the boards of directors of Devon Energy Corporation (“Devon”) and WPX Energy, Inc. (“WPX”), we are pleased to enclose the accompanying joint proxy statement/prospectus relating to the merger of Devon and WPX. We are requesting that you take certain actions as a Devon or WPX stockholder.

On September 26, 2020, Devon, East Merger Sub, Inc., a Delaware corporation and wholly-owned, direct subsidiary of Devon (“Merger Sub”), and WPX entered into an Agreement and Plan of Merger (as amended from time to time, the “Merger Agreement”), providing for the merger of Merger Sub with and into WPX, with WPX surviving the merger (the “merger”) as a wholly-owned, direct subsidiary of Devon. In the merger, WPX stockholders will be entitled to receive, in exchange for each share of WPX common stock, par value $0.01 per share (“WPX Common Stock”), owned by them immediately prior to such merger, 0.5165 shares of Devon common stock, par value $0.10 per share (“Devon Common Stock”), with cash paid in lieu of the issuance of any fractional shares, which we refer to collectively as the merger consideration.

Devon and WPX will each hold special meetings of their respective stockholders in connection with the proposed merger (respectively, the “Devon Special Meeting” and “WPX Special Meeting”).

At the Devon Special Meeting, holders of Devon Common Stock (the “Devon stockholders”) will be asked to vote on proposals to (i) approve the issuance of shares of Devon Common Stock to the holders of WPX Common Stock (the “WPX stockholders”) in connection with the merger pursuant to the terms of the Merger Agreement (the “Stock Issuance Proposal”) and (ii) approve the adjournment of the Devon Special Meeting to solicit additional proxies if there are not sufficient votes cast at the Devon Special Meeting to approve the Stock Issuance Proposal (the “Devon Adjournment Proposal”). Approval of the Stock Issuance Proposal requires the affirmative vote of a majority of the Devon Common Stock entitled to vote thereon and present in person or represented by proxy at the Devon Special Meeting. Approval of the Devon Adjournment Proposal requires the affirmative vote of a majority of the Devon Common Stock entitled to vote thereon and present in person or represented by proxy at the Devon Special Meeting. Under the Devon Bylaws, virtual attendance at the special meeting constitutes presence in person for purposes of the vote required.

Contemporaneously and in connection with the execution of the Merger Agreement, Devon entered into a support agreement (the “EnCap Support Agreement”) (a copy of which is attached as Annex D to this joint proxy statement/prospectus) with certain WPX stockholders affiliated with EnCap Investments L.P. (such stockholders are referred to herein collectively as “EnCap”), pursuant to which EnCap agreed, among other things, subject to the terms and conditions thereof, to vote all of the shares of WPX Common Stock held by EnCap as of such date in favor of the Merger Proposal at the WPX Special Meeting. For more information, please see “The Merger Agreement—EnCap Support Agreement.” For more information regarding the security ownership of EnCap, please see “Certain Beneficial Owners of WPX Common Stock.”

The Devon Special Meeting will be held virtually at www.virtualshareholdermeeting.com/DVN2020SM, on December 30, 2020, at 9:30 a.m., Central Time. Devon’s board of directors (the “Devon Board”) unanimously recommends that Devon stockholders vote “FOR” the Stock Issuance Proposal.

At the WPX Special Meeting, WPX stockholders will be asked to vote on proposals to (i) adopt the Merger Agreement (the “Merger Proposal”), (ii) approve, on a non-binding advisory basis, the compensation that may be paid or become payable to WPX’s named executive officers that is based on or otherwise relates to the merger (the “Advisory Compensation Proposal”) and (iii) approve the adjournment of the WPX Special Meeting to solicit additional proxies if there are not sufficient votes cast at the WPX Special Meeting to approve the Merger Proposal (the “WPX Adjournment Proposal”). Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of WPX Common Stock entitled to vote on the proposal. Approval of the WPX Adjournment Proposal and, assuming a quorum is present, the Advisory Compensation Proposal requires the affirmative vote of the holders of a majority of the WPX Common Stock entitled to vote


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thereon and present in person or represented by proxy at the WPX Special Meeting. Under the WPX Bylaws, virtual attendance at the special meeting constitutes presence in person for purposes of the vote required.

The WPX Special Meeting will be held virtually at www.meetingcenter.io/279855004, on December 30, 2020, at 9:30 a.m., Central Time. The board of directors of WPX (the “WPX Board”) unanimously recommends that WPX stockholders vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the WPX Adjournment Proposal.

If the merger is completed, at the effective time of the merger (the “Effective Time”), each issued and outstanding share of WPX Common Stock as of immediately prior to the Effective Time that is eligible to be converted into Devon Common Stock in accordance with the terms of the Merger Agreement will convert automatically into the right to receive 0.5165 shares of Devon Common Stock (the “Exchange Ratio”), with cash paid in lieu of the issuance of fractional shares, if any. Although the number of shares of Devon Common Stock that WPX stockholders will receive in exchange for their shares of WPX Common Stock is fixed, the market value of the merger consideration will fluctuate with the market price of Devon Common Stock and will not be known at the time WPX stockholders vote to adopt the Merger Agreement or at the time Devon stockholders vote to approve the Stock Issuance Proposal. Based on the closing price of Devon Common Stock on the New York Stock Exchange (“NYSE”) on September 25, 2020, the last trading day before the public announcement of the parties entering into the Merger Agreement, the exchange ratio represented approximately $4.53 in value for each share of WPX Common Stock. Based on the closing price of Devon Common Stock on the NYSE on November 18, 2020, the last practicable trading day before the date of the accompanying joint proxy statement/prospectus, the exchange ratio represented approximately $6.59 in value for each share of WPX Common Stock. Based on the estimated number of shares of Devon Common Stock and estimated number of shares of WPX Common Stock, as well as the outstanding equity awards of the parties, that will be outstanding immediately prior to the consummation of the merger, we estimate that, upon consummation of the merger, Devon stockholders as of immediately prior to the merger will hold approximately 57%, and WPX stockholders as of immediately prior to the merger will hold approximately 43%, of the issued and outstanding shares of Devon Common Stock (in each case based on fully diluted shares outstanding of each company). We urge you to obtain current market quotations for Devon Common Stock (trading symbol “DVN”) and WPX Common Stock (trading symbol “WPX”).

The obligations of Devon and WPX to complete the merger are subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement, a copy of which is attached as Annex A to the accompanying joint proxy statement/prospectus. The accompanying joint proxy statement/prospectus describes the Devon Special Meeting and the proposals to be considered thereat, the WPX Special Meeting and the proposals to be considered thereat, the merger and the documents and agreements related to the merger. It also contains or references information about Devon and WPX and certain related agreements and matters. Please carefully read the entire accompanying joint proxy statement/prospectus, including “Risk Factors” beginning on page 33, for a discussion of the risks relating to the proposed merger. You also can obtain information about Devon and WPX from documents that each has filed with the Securities and Exchange Commission (the “SEC”). Please see “Where You Can Find More Information” beginning on page 216 of the accompanying joint proxy statement/prospectus for how you may obtain such information.

Sincerely,

 

David A. Hager    Richard E. Muncrief
President and Chief Executive Officer
Devon Energy Corporation
  

Chairman of the Board of Directors and Chief Executive Officer

WPX Energy, Inc.

Neither the SEC nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger described in the accompanying joint proxy statement/prospectus or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

The accompanying joint proxy statement/prospectus is dated November 24, 2020 and is first being mailed to Devon stockholders of record and WPX stockholders of record on or about November 30, 2020.


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LOGO

333 W. Sheridan Ave.

Oklahoma City, Oklahoma 73102-5015

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

OF

DEVON ENERGY CORPORATION

TO BE HELD ON DECEMBER 30, 2020

To the Stockholders of Devon Energy Corporation:

You are cordially invited to attend the special meeting of stockholders (the “Devon Special Meeting”) of Devon Energy Corporation (“Devon”) virtually, to be held at 9:30 a.m., Central Time, on December 30, 2020 virtually at www.virtualshareholdermeeting.com/DVN2020SM, for the following purposes:

 

  1.

to consider and vote on a proposal (the “Stock Issuance Proposal”) to approve the issuance of shares of Devon’s common stock, par value $0.10 per share (the “Devon Common Stock”), pursuant to the Agreement and Plan of Merger, dated as of September 26, 2020 (the “Merger Agreement”), by and among Devon, East Merger Sub, Inc. (“Merger Sub”) and WPX Energy, Inc. (“WPX”), as it may be amended from time to time, a copy of which is attached as Annex A to the joint proxy statement/prospectus; and

  2.

to consider and vote on a proposal to approve the adjournment of the Devon Special Meeting, if necessary or appropriate, for the purpose of soliciting additional votes for the approval of the Stock Issuance Proposal (the “Devon Adjournment Proposal”).

Devon will transact no other business at the Devon Special Meeting or any adjournment or postponement thereof, except such business as may properly be brought before the Devon Special Meeting by or at the direction of the board of directors of Devon (the “Devon Board”) in accordance with Devon’s amended and restated bylaws. These items of business are described in the enclosed joint proxy statement/prospectus. The Devon Board has designated the close of business on November 4, 2020 as the record date for the purpose of determining the holders of shares of Devon Common Stock who are entitled to receive notice of, and to vote at, the Devon Special Meeting and any adjournment or postponement of the special meeting, unless a new record date is fixed in connection with any adjournment or postponement of the special meeting. Only holders of record of Devon Common Stock at the close of business on the record date are entitled to notice of, and to vote at, the Devon Special Meeting and at any adjournment or postponement of the special meeting.

The Devon Board has (i) determined that it is in the best interest of Devon and the holders of Devon Common Stock to enter into the Merger Agreement, (ii) declared entry into the Merger Agreement to be advisable, (iii) authorized and approved Devon’s execution, delivery and performance of the Merger Agreement in accordance with its terms and Devon’s consummation of the transactions contemplated thereby, including the merger of Merger Sub and WPX contemplated thereby (the “merger”) and the issuance of Devon Common Stock contemplated by the Stock Issuance Proposal, (iv) directed that the approval of the Stock Issuance Proposal be submitted to a vote at a meeting of the holders of Devon Common Stock and (v) recommended that the holders of Devon Common Stock approve the Stock Issuance Proposal. The Devon Board recommends that holders of Devon Common Stock vote “FOR” the Stock Issuance Proposal and “FOR” the Devon Adjournment Proposal.


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Properly executed proxy cards with no instructions indicated on the proxy card will be voted “FOR” the Stock Issuance Proposal and “FOR” the Devon Adjournment Proposal. Even if you plan to attend the Devon Special Meeting virtually, Devon requests that you complete, sign, date and return the enclosed proxy card in the accompanying envelope prior to the special meeting to ensure that your shares will be represented and voted at the special meeting if you later decide not to or become unable to attend virtually.

You may also submit a proxy over the Internet using the Internet address on the enclosed proxy card or by telephone using the toll-free number on the enclosed proxy card. If you submit your proxy through the Internet or by telephone, you will be asked to provide the control number from the enclosed proxy card. If you are not a stockholder of record, but instead hold your shares in “street name” through a broker, bank, trust or other nominee, you must provide a proxy executed in your favor from your broker, bank, trust or other nominee in order to be able to vote at the special meeting.

Submitting a proxy will not prevent you from voting virtually at the meeting, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Devon Common Stock may vote virtually at the special meeting, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the special meeting in the manner described in the joint proxy statement/prospectus.

Please vote as promptly as possible, whether or not you plan to attend the Devon Special Meeting virtually. If your shares are held in the name of a broker, bank, or other nominee, please vote by following the instructions on the voting instruction form furnished by the broker, bank, or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the Internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the self-addressed, stamped envelope provided. Submitting a proxy will not prevent you from voting virtually, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of Devon Common Stock entitled to vote thereon and who is virtually present at the Devon Special Meeting may vote, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the Devon Special Meeting in the manner described in this joint proxy statement/prospectus.

If you have any questions concerning the merger or the joint proxy statement/prospectus, would like additional copies or need help voting your shares of Devon Common Stock, please contact Devon’s proxy solicitor:

 

LOGO

1407 Broadway, 27th Floor

New York, New York 10018

Email: proxy@mackenziepartners.com

Call Collect: (212) 929-5500

Toll-Free: (800) 322-2885

By Order of the Board of Directors

Christopher J. Kirt

Vice President Corporate Governance and Secretary

Oklahoma City, Oklahoma

November 24, 2020

 

Your vote is very important, regardless of the number of shares of Devon Common Stock you own. The merger cannot be completed unless stockholders of both Devon and WPX approve certain proposals related to the merger. Whether or not you plan to attend the Devon Special Meeting virtually, please submit a proxy to vote your shares as promptly as possible to make sure that your shares are represented at the Devon Special Meeting.

 


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LOGO

WPX ENERGY, INC.

3500 One Williams Center

Tulsa, Oklahoma 74172

NOTICE OF SPECIAL MEETING OF

STOCKHOLDERS OF WPX ENERGY, INC.

TO BE HELD DECEMBER 30, 2020

Dear Stockholder:

You are cordially invited to attend the special meeting of stockholders (the “WPX Special Meeting”) of WPX Energy, Inc. (“WPX”) virtually, to be held at 9:30 a.m., Central Time, on December 30, 2020 at www.meetingcenter.io/279855004, for the following purposes:

 

  1.

To vote on a proposal to adopt the Agreement and Plan of Merger, dated as of September 26, 2020 (as amended from time to time, the “Merger Agreement”), by and among Devon Energy Corporation (“Devon”), WPX and East Merger Sub, Inc., a Delaware corporation and a wholly-owned, direct subsidiary of Devon (“Merger Sub”) and WPX (the “Merger Proposal”);

 

  2.

To vote on a proposal to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to WPX’s named executive officers that is based on or otherwise relates to the merger (as defined below) (the “Advisory Compensation Proposal”); and

 

  3.

To vote on a proposal to approve the adjournment of the WPX Special Meeting to solicit additional proxies if there are not sufficient votes cast at the WPX Special Meeting to approve the Merger Proposal (the “WPX Adjournment Proposal”).

WPX will transact no other business at the WPX Special Meeting, except such business as may properly be brought before the WPX Special Meeting or any adjournment or postponement thereof by or at the direction of the WPX board of directors (the “WPX Board”) in accordance with WPX’s amended and restated bylaws. This joint proxy statement/prospectus, of which this notice is a part, describes the proposals listed above in more detail. Please refer to the attached documents, including the Merger Agreement and all other annexes and any documents incorporated by reference, for further information with respect to the business to be transacted at the WPX Special Meeting. You are encouraged to read the entire document carefully before voting. In particular, please see the sections entitled “The Merger” beginning on page 53 for a description of the transactions contemplated by the Merger Agreement and “Risk Factors” beginning on page 33 for an explanation of the risks associated with the merger and the other transactions contemplated by the Merger Agreement.

Approval of the WPX Merger Proposal by the affirmative vote of the holders of a majority of the outstanding shares of WPX common stock, par value $0.01 per share (“WPX Common Stock”), entitled to vote on the proposal is required to complete the merger between WPX and Merger Sub, as contemplated pursuant to the Merger Agreement (the “merger”). Holders of WPX Common Stock (“WPX stockholders”) will also be asked to approve the Advisory Compensation Proposal and the WPX Adjournment Proposal.

The WPX Board has fixed the close of business on November 4, 2020, as the record date for the determination of the WPX stockholders entitled to receive notice of, and to virtually vote at, the WPX Special Meeting or any adjournment or postponement thereof. The WPX stockholders of record as of the close of business on the record date are the only WPX stockholders that are entitled to receive notice of, and to virtually vote at, the WPX Special Meeting or any adjournment or postponement thereof. For additional information regarding the WPX Special Meeting, please see the section entitled “WPX Special Meeting” beginning on page 157 of this joint proxy statement/prospectus.


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The WPX Board, at a meeting duly called and held, has by unanimous vote (i) declared that the Merger Agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of WPX and the WPX stockholders, (ii) approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the merger and (iii) recommended that the WPX stockholders adopt the Merger Agreement and approve the transactions contemplated thereby, including the merger. The WPX Board unanimously recommends that holders of WPX Common Stock vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the WPX Adjournment Proposal.

Please vote as promptly as possible, whether or not you plan to attend the WPX Special Meeting virtually. If your shares are held in the name of a broker, bank, or other nominee, please vote by following the instructions on the voting instruction form furnished by the broker, bank, or other nominee. If you hold your shares in your own name, submit a proxy to vote your shares as promptly as possible by (i) visiting the Internet site listed on the proxy card, (ii) calling the toll-free number listed on the proxy card or (iii) submitting your proxy card by mail by using the self-addressed, stamped envelope provided. Submitting a proxy will not prevent you from voting virtually, but it will help to secure a quorum and avoid added solicitation costs. Any eligible holder of WPX Common Stock entitled to vote thereon and who is virtually present at the WPX Special Meeting may vote, thereby revoking any previous proxy. In addition, a proxy may also be revoked in writing before the WPX Special Meeting in the manner described in this joint proxy statement/prospectus.

If you have any questions concerning the Merger Proposal, the Advisory Compensation Proposal, the WPX Adjournment Proposal, the merger or this joint proxy statement/prospectus, would like additional copies, or need help voting your shares of WPX Common Stock, please contact WPX’s proxy solicitor:

Georgeson LLC

1290 Avenue of the Americas, 9th Floor

New York, New York 10104

Stockholders, banks and brokers call toll-free: (800) 903-2897

By Order of the Board of Directors

Stephen E. Brilz

Vice President and Corporate Secretary

Tulsa, Oklahoma

November 24, 2020

 

Your vote is very important. The merger between Devon and WPX cannot be completed without the approval of the Merger Proposal by the affirmative vote of the holders of a majority of the outstanding shares of WPX Common Stock entitled to vote on the proposal.

 


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ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange Commission (the “SEC”) by Devon, constitutes a prospectus of Devon under Section 5 of the Securities Act of 1933 (as amended, the “Securities Act”) with respect to the shares of Devon Common Stock to be issued to WPX stockholders pursuant to the Merger Agreement. This document also constitutes a proxy statement of each of Devon and WPX under Section 14(a) of the Securities Exchange Act of 1934 (as amended, the “Exchange Act”). It also constitutes a notice of meeting with respect to the special meeting of WPX stockholders (the “WPX Special Meeting”) and the special meeting of Devon stockholders (the “Devon Special Meeting”).

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. Devon and WPX have not authorized anyone to provide you with information that is different from that contained in or incorporated by reference into this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated November 24, 2020. The information contained in this joint proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Neither the mailing of this joint proxy statement/prospectus to Devon stockholders and WPX stockholders nor the issuance by Devon of shares of Devon Common Stock pursuant to the Merger Agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Devon has supplied all information contained in this joint proxy statement/prospectus relating to Devon, and WPX has supplied all such information relating to WPX. Devon and WPX have both contributed to the information related to the merger contained in this joint proxy statement/prospectus.

Unless the context otherwise requires, all references in this joint proxy statement/prospectus to “Devon” refer to Devon Energy Corporation, a Delaware corporation. Unless the context otherwise requires, all references in this joint proxy statement/prospectus to “WPX” refer to WPX Energy, Inc., a Delaware corporation. All references in this joint proxy statement/prospectus to “Devon Common Stock” refer to the common stock of Devon, par value $0.10 per share, and all references in this joint proxy statement/prospectus to “WPX Common Stock” refer to the common stock of WPX, par value $0.01 per share. All references in this joint proxy statement/prospectus to “Merger Agreement” refer to the Agreement and Plan of Merger, dated as of September 26, 2020, by and between Devon, East Merger Sub, Inc., a Delaware corporation and a wholly-owned, direct subsidiary of Devon (“Merger Sub”), and WPX, as it may be amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein. All references in this joint proxy statement/prospectus to the “Exchange Ratio” refer to the ratio of 0.5165 shares of Devon Common Stock per outstanding share of WPX Common Stock that will be issued to WPX stockholders in connection with the merger.

 

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ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates by reference important business and financial information about Devon and WPX from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference into this joint proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 216.

You may request copies of this joint proxy statement/prospectus and any of the documents incorporated by reference herein or other information concerning Devon or WPX, without charge, upon written or oral request to the applicable company’s principal executive offices. The respective addresses and phone numbers of such principal executive offices are listed below.

 

For Devon Stockholders:    For WPX Stockholders:

Devon Energy Corporation

333 W. Sheridan Avenue

Oklahoma City, OK 73102

Attention: Investor Relations

Telephone: (405) 235-3611

  

WPX Energy, Inc.

3500 One Williams Center

Tulsa, OK 74172

Attention: Investor Relations

Telephone: (855) 979-2012

If you would like to request any of the Devon or WPX documents that are incorporated by reference into this joint proxy statement/prospectus, please do so by December 22, 2020 in order to receive them before the Devon Special Meeting and the WPX Special Meeting.

You may also obtain any of the documents incorporated by reference into this joint proxy statement/prospectus without charge through the SEC’s website at www.sec.gov. In addition, you may obtain copies of documents filed by Devon with the SEC by accessing Devon’s website at https://investors.devonenergy.com/investors/default.aspx. You may also obtain copies of documents filed by WPX with the SEC by accessing WPX’s website at https://www.wpxenergy.com/investors/.

We are not incorporating the contents of the websites of the SEC, Devon, WPX or any other entity into this joint proxy statement/prospectus. We are providing the information about how you can obtain certain documents that are incorporated by reference into this joint proxy statement/prospectus at these websites only for your convenience.

In addition, if you have questions about the merger (as defined below) or this joint proxy statement/prospectus, would like additional copies of this joint proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, contact MacKenzie Partners, Inc., the proxy solicitor for Devon, toll-free at (800) 322-2885 or, for brokers and banks, collect at (212) 929-5500, or Georgeson LLC, the proxy solicitor for WPX, toll-free at (800) 903-2897. You will not be charged for any of these documents that you request.

 

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         page  

QUESTIONS AND ANSWERS

     vii  

SUMMARY

     1  
  The Parties to the Merger (See page 52)      1  
  The Merger and the Merger Agreement (See pages 53 and 107)      1  
  Exchange Ratio (See page 108)      1  
  The Devon Special Meeting (See page 149)      2  
  Recommendation of the Devon Board and its Reasons for the Merger (See page 64)      3  
  Opinion of Devon’s Financial Advisor (See page 67)      3  
  Interests of Devon’s Directors and Executive Officers in the Merger (See page 99)      3  
  The WPX Special Meeting (See page 157)      4  
  EnCap Support Agreement (See page 147)      5  
  Recommendation of the WPX Board and its Reasons for the Merger (See page 73)      5  
  Opinion of WPX’s Financial Advisor (See page 78)      5  
  Interests of WPX’s Directors and Executive Officers in the Merger (See page 92)      6  
  Treatment of Existing WPX Long-Term Incentive Awards in the Merger (See page 109)      6  
  Treatment of Indebtedness      8  
  Certain Beneficial Owners of WPX Common Stock (See page 209)      8  
  Ownership of Devon after the Merger      9  
  Board of Directors and Management of Devon Following the Merger (See page 91)      9  
  Conditions to the Completion of the Merger (See page 142)      9  
  No Solicitation of Acquisition Proposals by WPX (See page 126)      11  
  No Solicitation of Acquisition Proposals by Devon (See page 127)      12  
  No Change of Recommendation by WPX (See page 129)      13  
  No Change of Recommendation by Devon (See page 130)      15  
  Termination of the Merger Agreement (See page 143)      16  
  Payment of Expenses (See page 145)      18  
  Termination Fee (See page 145)      18  
  Accounting Treatment (See page 105)      19  
  Material U.S. Federal Income Tax Consequences of the Merger (See page 179)      19  
  Fractional Shares (See page 113)      20  
  Comparison of Stockholders’ Rights (See page 184)      21  
 

Listing of Devon Common Stock; Delisting and Deregistration of WPX Common Stock (See page 104)

     21  
  Regulatory Matters (See page 105)      21  
  No Appraisal Rights (See page 105)      21  
  Litigation Related to the Merger (See page 105)      21  
  Risk Factors (See page 33)      22  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DEVON

     23  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF WPX

     25  

SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     28  

SUMMARY UNAUDITED PRO FORMA COMBINED OIL, NATURAL GAS AND NGL RESERVE INFORMATION AND PRODUCTION DATA

     29  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE INFORMATION

     30  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     31  
  Dividend Information      32  

 

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RISK FACTORS

     33  
 

Risks Relating to the Merger

     33  
  Risks Relating to Devon and WPX      39  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     50  

THE PARTIES TO THE MERGER

     52  
  Devon Energy Corporation      52  
  WPX Energy, Inc.      52  
  East Merger Sub, Inc.      52  

THE MERGER

     53  
  Transaction Structure      53  
  Consideration to WPX stockholders      53  
  Background of the Merger      53  
  Recommendation of the Devon Board and its Reasons for the Merger      64  
  Opinion of Devon’s Financial Advisor      67  
  Recommendation of the WPX Board and its Reasons for the Merger      73  
  Opinion of WPX’s Financial Advisor      78  
  Certain Unaudited Forecasted Financial Information      87  
  Board of Directors and Executive Officers After Completion of the Merger      91  
  Headquarters      92  
  Treatment of Indebtedness      92  
  Interests of WPX’s Directors and Executive Officers in the Merger      92  
  Interests of Devon’s Directors and Executive Officers in the Merger      99  
  Indemnification and Insurance      103  
  Dividend Policy      104  
  Listing of Devon Common Stock; Delisting and Deregistration of WPX Common Stock      104  
  Accounting Treatment of the Merger      105  
  Regulatory Matters      105  
  No Appraisal Rights      105  
  Litigation Related to the Merger      105  

THE MERGER AGREEMENT

     107  
  Explanatory Note Regarding the Merger Agreement      107  
  Structure of the Merger      107  
  Completion and Effectiveness of the Merger      107  
  Merger Consideration      108  
  Treatment of WPX Equity Awards      109  
  Board of Directors and Executive Officers After Completion of the Merger      110  
  Corporate Governance Matters      110  
  Exchange of Shares      112  
  Treatment of Excess Shares      113  
  Termination of the Exchange Fund      113  
  Withholding Rights      114  
  Escheat Laws      114  
  No Interest      114  
  Stock Certificates and Transfer Books      114  
  Adjustments to Exchange Ratio      114  
  Representations and Warranties      115  
  Covenants      118  
  No Change of Recommendation      129  
  Investigation      132  
  Consummation of the Merger; Additional Agreements      132  

 

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         page  
  Proxy Statement / Form S-4; Stockholders’ Meeting      134  
  Notification of Certain Matters      134  
  Directors’ and Officers’ Insurance and Indemnification      135  
  Public Disclosure      137  
  Stock Exchange Listing      137  
  Employee Matters      137  
  Certain Tax Matters      139  
  Takeover Laws      139  
  Section 16 Matters      140  
  Treatment of Existing Indebtedness      140  
  Stockholder Litigation      141  
  Charitable Contributions      141  
  New Felix Agreements      141  
  Conditions to the Completion of the Merger      142  
  Termination of the Merger Agreement      143  
  Expenses in connection with a Termination      145  
  Termination Fee      145  
  Amendment; Waiver      146  
  Specific Performance      147  
  Third-Party Beneficiaries      147  
  EnCap Support Agreement      147  

DEVON SPECIAL MEETING

     149  
  General      149  
  Date, Time and Place      149  
  Purpose of the Devon Special Meeting      149  
  Recommendation of the Devon Board      149  
  Record Date; Stockholders Entitled to Vote      149  
  Quorum; Adjournment      150  
  Required Vote      150  
  Abstentions and Broker Non-Votes      151  
  Failure to Vote      151  
  Voting by Devon’s Directors and Executive Officers      152  
  Voting at the Devon Special Meeting      152  
  Revocation of Proxies      153  
  Assistance      154  

DEVON PROPOSAL 1—THE STOCK ISSUANCE PROPOSAL

     155  

DEVON PROPOSAL 2—THE DEVON ADJOURNMENT PROPOSAL

     156  

WPX SPECIAL MEETING

     157  
  General      157  
  Date, Time and Place      157  
  Purpose of the WPX Special Meeting      157  
  Recommendation of the WPX Board      157  
  Record Date; Stockholders Entitled to Vote      157  
  Quorum; Adjournment      158  
  Required Vote      158  
  Abstentions and Broker Non-Votes      159  
  Failure to Vote      159  
  Voting by WPX’s Directors and Executive Officers      160  
  Voting at the WPX Special Meeting      160  

 

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         page  
  Revocation of Proxies      161  
  Solicitation of Proxies      161  
  Tabulation of Votes      161  
  Appraisal Rights      161  
  Householding of WPX Special Meeting Materials      161  
  Questions      162  
  Assistance      162  

WPX PROPOSAL 1—THE MERGER PROPOSAL

     163  

WPX PROPOSAL 2—THE ADVISORY COMPENSATION PROPOSAL

     164  

WPX PROPOSAL 3—THE WPX ADJOURNMENT PROPOSAL

     165  

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     166  
  Basis of Presentation      171  
  Merger Consideration and Purchase Price Allocation      171  
  Pro Forma Adjustments      172  
  Supplemental Pro Forma Oil and Natural Gas Reserves Information      175  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     179  

DESCRIPTION OF DEVON CAPITAL STOCK

     181  
  General      181  
  Common Stock      181  
  Preferred Stock      181  
  Certain Anti-takeover Matters      181  
  Listing      183  
  Transfer Agent and Registrar      183  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     184  

CERTAIN BENEFICIAL OWNERS OF WPX COMMON STOCK

     209  

VALIDITY OF COMMON STOCK

     211  

EXPERTS

     212  
 

Devon

     212  
 

WPX

     212  

STOCKHOLDER PROPOSALS

     213  
 

Devon

     213  
 

WPX

     213  

HOUSEHOLDING OF PROXY MATERIALS

     215  

WHERE YOU CAN FIND MORE INFORMATION

     216  
  Devon SEC Filings      216  
  WPX SEC Filings      216  

ANNEX A—MERGER AGREEMENT

     A-1  

ANNEX B—OPINION OF DEVON’S FINANCIAL ADVISOR

     B-1  

ANNEX C—OPINION OF WPX’S FINANCIAL ADVISOR

     C-1  

ANNEX D—ENCAP SUPPORT AGREEMENT

     D-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the WPX Special Meeting, the Devon Special Meeting and the merger. They may not include all the information that is important to WPX stockholders and Devon stockholders. WPX stockholders and Devon stockholders should carefully read this entire joint proxy statement/prospectus, including the annexes and the other documents referred to herein.

 

Q:

Why am I receiving this joint proxy statement/prospectus?

 

A:

This joint proxy statement/prospectus serves as a proxy statement for the WPX Special Meeting and Devon Special Meeting.

You are receiving this joint proxy statement/prospectus because Devon and WPX have agreed to combine in an all-stock merger of equals transaction. At the Effective Time, Merger Sub will merge with and into WPX, the separate corporate existence of Merger Sub will cease and WPX will continue as the surviving corporation in the merger as a wholly-owned, direct subsidiary of Devon. As referred to in this joint proxy statement/prospectus, the “Effective Time” means the effective time of the merger and as set forth in the Merger Agreement. The Merger Agreement governs the terms of the merger of Merger Sub and WPX and is attached to this joint proxy statement/prospectus as Annex A.

In order to complete the merger, among other things, WPX stockholders must adopt the Merger Agreement in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), and Devon stockholders must approve the issuance of shares of Devon Common Stock in connection with the merger.

This joint proxy statement/prospectus serves as both the proxy statement through which Devon and WPX will solicit proxies to obtain the necessary stockholder approvals for the merger and the prospectus by which Devon will issue shares of Devon Common Stock as consideration in the merger.

This joint proxy statement/prospectus, which you should carefully read in its entirety, contains important information about the WPX Special Meeting and Devon Special Meeting, the merger and other matters.

 

Q:

What will happen in the merger?

 

A:

The Merger Agreement sets forth the terms and conditions of the proposed merger of Merger Sub and WPX. Under the Merger Agreement, Merger Sub will merge with and into WPX, the separate corporate existence of Merger Sub will cease and WPX will continue as the surviving corporation in the merger as a wholly-owned, direct subsidiary of Devon (the “merger”).

The Merger Agreement is attached to this joint proxy statement/prospectus as Annex A. For a more complete discussion of the proposed merger, its effects and the other transactions contemplated by the Merger Agreement, please see “The Merger” elsewhere in this joint proxy statement/prospectus.

 

Q:

What are WPX stockholders being asked to vote on?

 

A:

WPX is holding a special meeting of its stockholders to adopt the Merger Agreement (the “Merger Proposal”), pursuant to which each outstanding share of WPX Common Stock will be cancelled and converted into the right to receive 0.5165 shares of Devon Common Stock, with cash paid in lieu of the issuance of any fractional shares.

WPX stockholders will also be asked to (1) approve, on a non-binding advisory basis, the compensation that may be paid or become payable to WPX’s named executive officers that is based on or otherwise relates to

 

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the merger (the “Advisory Compensation Proposal”); and (2) approve the proposal to adjourn the WPX Special Meeting to solicit additional proxies if there are not sufficient votes at the time of the WPX Special Meeting to approve the Merger Proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to WPX stockholders (the “WPX Adjournment Proposal”).

Your vote is very important, regardless of the number of shares that you own. The approval of the Merger Proposal is a condition to the obligations of Devon and WPX to complete the merger.

 

Q:

What are Devon stockholders being asked to vote on?

 

A:

Devon is holding a special meeting of its stockholders to vote on the approval of the issuance of shares of Devon Common Stock in connection with the merger (the “Stock Issuance Proposal”), pursuant to Sections 312.03(c) and 312.07 of the NYSE Listed Company Manual.

Devon stockholders will also be asked to approve the proposal to adjourn the Devon Special Meeting to solicit additional proxies if there are not sufficient votes at the time of the Devon Special Meeting to approve the Stock Issuance Proposal or to ensure that any supplement or amendment to this joint proxy statement/prospectus is timely provided to Devon stockholders (the “Devon Adjournment Proposal”).

Your vote is very important, regardless of the number of shares that you own. The approval of the Stock Issuance Proposal is a condition to the obligations of each of Devon and WPX to complete the merger.

 

Q:

How important is my vote as a WPX stockholder?

 

A:

Your vote “FOR” each proposal presented at the WPX Special Meeting is very important, and you are encouraged to submit a proxy as soon as possible. The merger between Devon and WPX cannot be completed without the approval of the Merger Proposal by the WPX stockholders.

 

Q:

How important is my vote as a Devon stockholder?

 

A:

Your vote “FOR” each proposal presented at the Devon Special Meeting is very important, and you are encouraged to submit a proxy as soon as possible. The merger between Devon and WPX cannot be completed without the approval of the Stock Issuance Proposal by the Devon stockholders.

 

Q:

What constitutes a quorum, and what vote is required to approve each proposal at the WPX Special Meeting?

 

A:

The holders of a majority of the outstanding shares of WPX Common Stock entitled to vote at the WPX Special Meeting must be represented at the WPX Special Meeting in person or by proxy in order to constitute a quorum. Under the WPX Bylaws, virtual attendance at the special meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the WPX Special Meeting.

Approval of the Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of WPX Common Stock entitled to vote on the proposal. Accordingly, a WPX stockholder’s abstention from voting or the failure of a WPX stockholder to vote (including the failure of a WPX stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to that bank, broker or other nominee) will have the same effect as a vote “against” the Merger Proposal.

Approval of the WPX Adjournment Proposal and, assuming a quorum is present, the Advisory Compensation Proposal requires the affirmative vote of the holders of a majority of the WPX Common

 

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Stock entitled to vote thereon and present in person or represented by proxy at the WPX Special Meeting. Accordingly, with respect to a WPX stockholder who is present in person or represented by proxy at the WPX Special Meeting, such stockholder’s abstention from voting or the failure of a WPX stockholder to vote will have the same effect as a vote “against” the Advisory Compensation Proposal and WPX Adjournment Proposal. The failure of a WPX stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to the bank, broker or other nominee will have no effect on the outcome of the Advisory Compensation Proposal and WPX Adjournment Proposal. However, if a WPX stockholder instructs its bank, broker or other nominee regarding some but not all of the proposals, such broker non-vote will have the same effect as voting “against” any proposal for which no instruction is provided. Regardless of whether there is a quorum, the chairman of the WPX Special Meeting may also adjourn the WPX Special Meeting.

 

Q:

What constitutes a quorum, and what vote is required to approve each proposal at the Devon Special Meeting?

 

A:

The holders of a majority of the outstanding shares of Devon Common Stock entitled to vote at the Devon Special Meeting must be represented at the Devon Special Meeting in person or by proxy in order to constitute a quorum. Under the Devon Bylaws, virtual attendance at the special meeting will constitute presence in person for the purpose of determining the presence of a quorum for the transaction of business at the Devon Special Meeting.

Assuming a quorum is present, approval of the Stock Issuance Proposal requires the affirmative vote of holders of a majority of the shares of Devon Common Stock present in person or represented by proxy at the Devon Special Meeting entitled to vote thereon. Accordingly, with respect to a Devon stockholder who is present in person or represented by proxy at the Devon Special Meeting, such stockholder’s abstention from voting or the failure of a Devon stockholder to vote will have the same effect as a vote “against” the Stock Issuance Proposal. The failure of a Devon stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to the bank, broker or other nominee will have no effect on the outcome of the Stock Issuance Proposal. However, if a Devon stockholder instructs its bank, broker or other nominee regarding the Devon Adjournment Proposal but not the Stock Issuance Proposal, such broker non-vote will have the same effect as voting “against” the Stock Issuance Proposal.

Approval of the Devon Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of Devon Common Stock present in person or represented by proxy at the Devon Special Meeting and entitled to vote thereon. Accordingly, with respect to a Devon stockholder who is present in person or represented by proxy at the Devon Special Meeting, such stockholder’s abstention from voting or the failure of a Devon stockholder to vote will have the same effect as a vote “against” the Devon Adjournment Proposal. The failure of a Devon stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to the bank, broker or other nominee will have no effect on the outcome of the Devon Adjournment Proposal. However, if a Devon stockholder instructs its bank, broker or other nominee regarding the Stock Issuance Proposal but not Devon Adjournment Proposal, such broker non-vote will have the same effect as voting “against” the Devon Adjournment Proposal. Regardless of whether there is a quorum, the chairman of the Devon Special Meeting may also adjourn the Devon Special Meeting.

 

Q:

How can I attend the WPX Special Meeting?

WPX stockholders as of the WPX Record Date may attend, vote and submit questions virtually at the WPX Special Meeting by logging in at www.meetingcenter.io/279855004. To log in, WPX stockholders (or their authorized representatives) will need the control number provided on their proxy card, voting instruction form or notice. If you are not a WPX stockholder or do not have a control number, you may still access the meeting as a guest, but you will not be able to participate.

 

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Q:

How can I attend the Devon Special Meeting?

 

  

Devon stockholders as of the Devon Record Date may attend, vote and submit questions virtually at the Devon Special Meeting by logging in at www.virtualshareholdermeeting.com/DVN2020SM. To log in, Devon stockholders (or their authorized representatives) will need the control number provided on their proxy card, voting instruction form or notice. If you are not a Devon stockholder or do not have a control number, you may still access the meeting as a guest, but you will not be able to participate.

 

Q:

Are there any stockholders who have already committed to voting in favor of any of the proposals at the WPX Special Meeting?

 

A:

Yes. Contemporaneously with the execution of the Merger Agreement, Devon entered into a support agreement (the “EnCap Support Agreement”) (a copy of which is attached as Annex D to this joint proxy statement/prospectus) with certain WPX stockholders affiliated with EnCap Investments L.P. (collectively, “EnCap”), pursuant to which EnCap agreed, among other things, subject to the terms and conditions thereof, to vote all of the shares of WPX Common Stock held by them as of such date in favor of the Merger Proposal at the WPX Special Meeting. EnCap beneficially owned approximately 27.3% of the outstanding shares of WPX Common Stock as of November 18, 2020. For more information, please see “The Merger Agreement—EnCap Support Agreement.”

 

Q:

What will WPX stockholders receive if the merger is completed?

 

A:

If the merger is completed, eligible shares of WPX Common Stock outstanding at the Effective Time will automatically be converted into the right to receive 0.5165 shares of Devon Common Stock. Each WPX stockholder will receive cash in lieu of any fractional share of Devon Common Stock that such stockholder would otherwise be entitled to receive in the merger.

Because Devon will issue a fixed number of shares of Devon Common Stock in exchange for each share of WPX Common Stock, the value of the merger consideration that WPX stockholders will receive in the merger will depend on the market price of shares of Devon Common Stock at the Effective Time. The market price of shares of Devon Common Stock that WPX stockholders receive at the Effective Time could be greater than, less than or the same as the market price of shares of Devon Common Stock on the date of this joint proxy statement/prospectus or at the time of the WPX Special Meeting. Accordingly, you should obtain current market quotations for Devon Common Stock and WPX Common Stock before deciding how to vote with respect to the Merger Proposal or the Stock Issuance Proposal, as applicable. Devon Common Stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “DVN.” WPX Common Stock is traded on the NYSE under the symbol “WPX.”

For more information regarding the merger consideration to be received by WPX stockholders if the merger is completed, please see “The Merger Agreement—Merger Consideration.”

 

Q:

Who will own Devon immediately following the merger?

 

A:

Devon and WPX estimate that upon the completion of the merger, current Devon stockholders, collectively, will own approximately 57% of the outstanding shares of Devon Common Stock, and current WPX stockholders, collectively, will own approximately 43% of the outstanding Devon Common Stock (in each case based on fully diluted shares outstanding of each company).

 

Q:

Will WPX equity and other long-term incentive awards be affected by the merger?

 

A:

Upon the completion of the merger, outstanding WPX equity awards will be affected as described below.

 

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At the Effective Time, each WPX Stock Option (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”) that is outstanding immediately prior to the Effective Time and that by its terms does not settle by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, cease to represent an option to purchase shares of WPX Common Stock and be converted into a Converted Stock Option (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”), representing an option to purchase a number of shares of Devon Common Stock equal to the product (with the result rounded down to the nearest whole number) of (i) the number of shares of WPX Common Stock subject to each such WPX Stock Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to (A) the exercise price per share of WPX Common Stock of such WPX Stock Option immediately prior to the Effective Time divided by (B) the Exchange Ratio. Immediately following the Effective Time, each Converted Stock Option otherwise will continue to be governed by the same terms and conditions (including vesting, forfeiture and exercisability terms) as were applicable to the corresponding WPX Stock Option immediately prior to the Effective Time.

At the Effective Time, each WPX RSU (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”) that is outstanding immediately prior to the Effective Time and that by its terms does not settle by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, be assumed by Devon and converted into a Converted RSU (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”) equal to the product of the number of shares of WPX Common Stock subject to the WPX RSU immediately prior to the Effective Time multiplied by the Exchange Ratio. Immediately following the Effective Time, each Converted RSU otherwise will continue to be governed by the same terms and conditions (including vesting and forfeiture) as were applicable to the corresponding WPX RSU immediately prior to the Effective Time, except that any performance-based vesting condition that applied to the WPX RSU immediately prior to the Effective Time will be treated as having been attained based on actual results measured using the average five-day closing price of WPX Common Stock ending on the day immediately preceding the date of closing, as determined by the Compensation Committee of the WPX Board, so that such WPX RSU will remain solely subject to the time-based vesting requirements in effect for the WPX RSU immediately prior to the Effective Time.

At the Effective Time, each WPX RSA (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”) that is outstanding immediately prior to the Effective Time and that by its terms does not vest by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, be assumed by Devon and converted into a Converted RSA (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”). Immediately following the Effective Time, each Converted RSA otherwise will continue to be governed by the same terms and conditions (including vesting, forfeiture and transferability terms) as were applicable to the corresponding WPX RSA immediately prior to the Effective Time.

Immediately prior to the Effective Time, the ESPP (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”) will terminate. Any offering period in effect under the ESPP prior to the closing will exercise on the ESPP Exercise Date (as defined in “Summary—Treatment of Existing WPX Long-Term Incentive Awards in the Merger”), with the automatic purchase of WPX Common Stock with respect to accumulated employee contributions of each participant under the ESPP in respect of such offering period to occur on such date. WPX will prohibit participants in the ESPP from altering their payroll deductions from those in effect on the date of the Merger Agreement (other than to discontinue their participation in the ESPP in accordance with the terms and conditions of the ESPP). The amount of the accumulated contributions of each participant under the ESPP as of immediately prior to the ESPP Exercise Date will, to the extent not used to purchase WPX Common Stock in accordance with the

 

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terms and conditions of the ESPP and the Merger Agreement, be refunded (without interest) to such participant as promptly as practicable following the Effective Time.

For additional information regarding the WPX equity and other long-term incentive awards, please see “The Merger Agreement—Treatment of WPX Equity Awards.”

 

Q:

What will the composition of the board of directors and management of Devon be following completion of the merger?

 

A:

The Devon board of directors (the “Devon Board”) at the Effective Time will be composed of (i) Barbara M. Baumann, John E. Bethancourt, Ann G. Fox, David A. Hager, John Krenicki Jr., Robert A. Mosbacher, Jr. and Duane C. Radtke (each a “Legacy Devon Director” and collectively the “Legacy Devon Directors”) and (ii) Kelt Kindick, Karl F. Kurz, Richard E. Muncrief, D. Martin Phillips, who is the designee of EnCap under the stockholders’ agreement that Devon and EnCap will enter into concurrently with the consummation of the merger (the “New Felix Stockholders’ Agreement”), and Valerie M. Williams (each a “Legacy WPX Director” and collectively the “Legacy WPX Directors”). At the Effective Time, a Legacy WPX Director who is mutually acceptable to Devon and WPX will be appointed the Lead Independent Director of the Devon Board.

The management of Devon following the completion of the merger will include officers and other key employees from both Devon and WPX. At the Effective Time, the senior leadership team of Devon will consist of: (i) David A. Hager, the current President and Chief Executive Officer of Devon, who will be appointed as the Executive Chairman of Devon; (ii) Richard E. Muncrief, the current Chairman and Chief Executive Officer of WPX, who will be appointed as President and Chief Executive Officer of Devon; (iii) Clay M. Gaspar, the current President and Chief Operating Officer of WPX, who will be appointed as the Executive Vice President and Chief Operating Officer of Devon; (iv) Jeffrey L. Ritenour, the current Executive Vice President and Chief Financial Officer of Devon, who will continue to serve in that position; (v) David G. Harris, the current Executive Vice President, Exploration and Production of Devon, who will be appointed as the Executive Vice President and Chief Corporate Development Officer of Devon; (vi) Dennis C. Cameron, the current Executive Vice President and General Counsel of WPX, who will be appointed as the Executive Vice President and General Counsel of Devon; and (vii) Tana K. Cashion, the current Senior Vice President, Human Resources of Devon, who will continue to serve in that position. For additional information regarding the Devon Board and the management of Devon following the completion of the merger, please see “The Merger Agreement—Board of Directors and Executive Officers After Completion of the Merger.”

 

Q:

How does the WPX Board recommend that I vote at the WPX Special Meeting?

 

A:

The WPX Board unanimously recommends that you vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the WPX Adjournment Proposal. For additional information regarding the recommendation of the WPX Board, please see “The Merger—Recommendation of the WPX Board and its Reasons for the Merger.”

 

Q:

Who is entitled to vote at the WPX Special Meeting?

 

A:

The record date for the WPX Special Meeting is November 4, 2020 (the “WPX Record Date”). All holders of shares of WPX Common Stock who held shares at the close of business on the WPX Record Date are entitled to receive notice of, and to vote at, the WPX Special Meeting. Each such holder of WPX Common Stock is entitled to cast one vote on each matter properly brought before the WPX Special Meeting for each share of WPX Common Stock that such holder owned of record as of the WPX Record Date. Please see “WPX Special Meeting—Voting at the WPX Special Meeting” for instructions on how to vote your shares without attending the WPX Special Meeting.

 

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Q:

How does the Devon Board recommend that I vote at the Devon Special Meeting?

 

A:

The Devon Board unanimously recommends that you vote “FOR” the Stock Issuance Proposal and “FOR” the Devon Adjournment Proposal. For additional information regarding the recommendation of the Devon Board, please see “The Merger—Recommendation of the Devon Board and its Reasons for the Merger.”

 

Q:

Who is entitled to vote at the Devon Special Meeting?

 

A:

The record date for the Devon Special Meeting is November 4, 2020 (the “Devon Record Date”). All holders of shares of Devon Common Stock who held shares at the close of business on the Devon Record Date are entitled to receive notice of, and to vote at, the Devon Special Meeting. Each such holder of Devon Common Stock is entitled to cast one vote on each matter properly brought before the Devon Special Meeting for each share of Devon Common Stock that such holder owned of record as of the Devon Record Date. Please see “Devon Special Meeting—Voting at the Devon Special Meeting” for instructions on how to vote your shares without attending the Devon Special Meeting.

 

Q:

What is a proxy?

 

A:

A stockholder’s legal designation of another person to vote shares of such stockholder’s common stock at a special or annual meeting is referred to as a proxy. The document used to designate a proxy to vote your shares of common stock is called a proxy card.

 

Q:

How many votes do I have for the WPX Special Meeting?

 

A:

Each WPX stockholder is entitled to one vote for each share of WPX Common Stock held of record as of the close of business on the WPX Record Date for each proposal. As of the close of business on the WPX Record Date, there were 561,040,585 outstanding shares of WPX Common Stock.

 

Q:

How many votes do I have for the Devon Special Meeting?

 

A:

Each Devon stockholder is entitled to one vote for each share of Devon Common Stock held of record as of the close of business on the Devon Record Date for each proposal. As of the close of business on the Devon Record Date, there were 382,527,981 outstanding shares of Devon Common Stock.

 

Q:

What will happen to my shares of Devon Common Stock?

 

A:

Nothing. You will continue to own the same shares of Devon Common Stock that you own prior to the Effective Time. As a result of the Stock Issuance Proposal, however, the overall ownership percentage of current Devon stockholders in the combined company will be diluted.

 

Q:

What happens if the merger is not completed?

 

A:

If the WPX stockholders do not approve the Merger Proposal or the Devon stockholders do not approve the Stock Issuance Proposal, or if the merger is not completed for any other reason, WPX stockholders will not receive any merger consideration for their shares of WPX Common Stock in connection with the merger. Instead, Devon and WPX will each remain independent public companies. The Devon Common Stock will continue to be listed and traded on the NYSE, and the WPX Common Stock will continue to be listed and traded on the NYSE. If the Merger Agreement is terminated under certain specified circumstances, Devon or WPX may be required to reimburse certain expenses of the other party, or to pay to the other party a termination fee of $75 million (the “Termination Fee”). Please see “The Merger Agreement—Termination Fee” for a more detailed discussion of the termination fee.

 

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Q:

How can I vote my shares and participate at the WPX Special Meeting?

 

A:

If you are a WPX stockholder of record as of the close of business on the WPX Record Date, you may submit your proxy before the special meeting in one of the following ways:

 

   

Telephone-use the toll-free number shown on your proxy card;

 

   

Internet-visit the website shown on your proxy card to vote via the Internet; or

 

   

Mail-complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If you are a WPX stockholder of record, you may also cast your vote virtually at the special meeting by following the instructions at www.meetingcenter.io/279855004. If you decide to attend the WPX Special Meeting virtually and vote at the meeting, your vote will revoke any proxy previously submitted.

The WPX Special Meeting will begin promptly at 9:30 a.m., Central Time, on December 30, 2020. WPX encourages its stockholders to access the meeting prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this joint proxy statement/prospectus.

Even if you plan to attend the WPX Special Meeting virtually, WPX recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the WPX Special Meeting.

 

Q:

How can I vote my shares without attending the WPX Special Meeting?

 

A:

Whether you hold your shares directly as a stockholder of record of WPX or beneficially in “street name,” you may direct your vote by proxy without attending the WPX Special Meeting. You can vote by proxy by mail, over the Internet or by telephone by following the instructions provided in the enclosed proxy card. Please note that if you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee.

Additional information on voting procedures can be found under “WPX Special Meeting.”

 

Q:

How can I vote my shares and participate at the Devon Special Meeting?

 

A:

If you are a Devon stockholder of record as of the close of business on the Devon Record Date, you may submit your proxy before the special meeting in one of the following ways:

 

   

Telephone-use the toll-free number shown on your proxy card;

 

   

Internet-visit the website shown on your proxy card to vote via the Internet; or

 

   

Mail-complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

If you are a Devon stockholder of record, you may also cast your vote virtually at the special meeting by following the instructions at www.virtualshareholdermeeting.com/DVN2020SM. If you decide to attend the Devon Special Meeting virtually and vote at the meeting, your vote will revoke any proxy previously submitted.

The Devon Special Meeting will begin promptly at 9:30 a.m., Central Time, on December 30, 2020. Devon encourages its stockholders to access the meeting prior to the start time leaving ample time for check-in. Please follow the instructions as outlined in this joint proxy statement/prospectus.

Even if you plan to attend the Devon Special Meeting virtually, Devon recommends that you vote your shares in advance as described below so that your vote will be counted if you later decide not to or become unable to attend the Devon Special Meeting.

 

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Q:

How can I vote my shares without attending the Devon Special Meeting?

 

A:

Whether you hold your shares directly as a stockholder of record of Devon or beneficially in “street name,” you may direct your vote by proxy without attending the Devon Special Meeting. You can vote by proxy by mail, over the Internet or by telephone by following the instructions provided in the enclosed proxy card. Please note that if you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee.

Additional information on voting procedures can be found under “Devon Special Meeting.”

 

Q:

When and where is the WPX Special Meeting? What must I bring to attend the WPX Special Meeting?

The WPX Special Meeting will be held virtually at www.meetingcenter.io/279855004, on December 30, 2020, at 9:30 a.m., Central Time. Online access will begin at 9:15 a.m., Central Time, and WPX encourages its stockholders to access the meeting prior to the start time.

WPX has chosen to hold the WPX Special Meeting solely via the Internet and not in a physical location given the public health impact of COVID-19 and the desire to promote the health and safety of WPX’s stockholders, directors, officers, employees and other constituents.

Even if you plan to attend the WPX Special Meeting virtually, WPX recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to or become unable to attend the special meeting.

 

Q:

When and where is the Devon Special Meeting? What must I bring to attend the Devon Special Meeting?

The Devon Special Meeting will be held virtually at www.virtualshareholdermeeting.com/DVN2020SM, on December 30, 2020, at 9:30 a.m., Central Time. Online access will begin at 9:15 a.m., Central Time, and Devon encourages its stockholders to access the meeting prior to the start time.

Devon has chosen to hold the Devon Special Meeting solely via the Internet and not in a physical location given the public health impact of COVID-19 and the desire to promote the health and safety of Devon’s stockholders, directors, officers, employees and other constituents.

Even if you plan to attend the Devon Special Meeting virtually, Devon recommends that you vote your shares in advance as described above so that your vote will be counted if you later decide not to or become unable to attend the special meeting.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner of shares held in “street name?”

 

A:

If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you must provide the record holder of your shares with instructions on how to vote your shares. Please follow the voting instructions provided by your broker, bank or other nominee. Please note that you may not vote shares held in street name by returning a proxy card directly to WPX or Devon, as applicable, or by voting in person at the WPX Special Meeting or Devon Special Meeting, as applicable, unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee.

 

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Q:

If my shares of WPX Common Stock or Devon Common Stock are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote those shares for me?

 

A:

Under the rules of the NYSE, your bank, broker or other nominee will only be permitted to vote your shares of WPX Common Stock or Devon Common Stock, as applicable, with respect to “non-routine” matters if you instruct your bank, broker or other nominee how to vote. All of the proposals scheduled for consideration at the WPX Special Meeting and Devon Special Meeting are “non-routine” matters. As a result, if you fail to provide voting instructions to your broker, bank or other nominee, your shares will not be counted as present at the WPX Special Meeting or Devon Special Meeting, as applicable, for purposes of determining a quorum and will not be voted on any of the proposals. If you provide voting instructions to your broker, bank or other nominee on one or more of the proposals but not on one or more of the other proposals, then your shares will be counted as present for the purposes of determining a quorum but will not be voted on any proposal for which you fail to provide instructions. To make sure that your shares are voted with respect to each of the proposals, you should instruct your bank, broker or other nominee how you wish to vote your shares in accordance with the procedures provided by your bank, broker or other nominee regarding the voting of your shares.

The effect of not instructing your bank, broker or other nominee how you wish to vote your shares will be the same as a vote “against” the Merger Proposal and will not have any effect on the outcome of the Stock Issuance Proposal, the Advisory Compensation Proposal or the WPX Adjournment Proposal or the Devon Adjournment Proposal, as applicable. However, if you instruct your bank, broker or other nominee on how you wish to vote your shares on some but not all proposals, such broker non-vote will have the same effect as voting “against” any proposal for which you do not provide instruction.

 

Q:

What should I do if I receive more than one set of voting materials for a stockholder meeting?

 

A:

If you hold shares of WPX Common Stock or Devon Common Stock in “street name” and also directly in your name as a stockholder of record or otherwise, or if you hold shares of WPX Common Stock or Devon Common Stock in more than one brokerage account, you may receive more than one set of voting materials relating to the WPX Special Meeting or the Devon Special Meeting.

Record Holders. For shares held directly, please complete, sign, date and return each proxy card, or you may cast your vote by telephone or Internet as provided on each proxy card, or otherwise follow the voting instructions provided in this joint proxy statement/prospectus in order to ensure that all of your shares of WPX Common Stock or Devon Common Stock are voted.

“Street nameHolders. For shares held in “street name” through a bank, broker or other nominee, you should follow the procedures provided by your bank, broker or other nominee to vote your shares.

 

Q:

If a stockholder gives a proxy, how are the shares of WPX Common Stock or Devon Common Stock, as applicable, voted?

 

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card will vote your shares of WPX Common Stock or Devon Common Stock, as applicable, in the way that you indicate. When completing the proxy card or the Internet or telephone processes, you may specify whether your shares of WPX Common Stock or Devon Common Stock, as applicable, should be voted for or against, or abstain from voting on, all, some or none of the specific items of business to come before the WPX Special Meeting or Devon Special Meeting.

 

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Q:

How will my shares of WPX Common Stock or Devon Common Stock be voted if I return a blank proxy?

 

A:

If you sign, date and return your proxy card and do not indicate how you want your shares of WPX Common Stock to be voted, then your shares of WPX Common Stock will be voted “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the WPX Adjournment Proposal.

If you sign, date and return your proxy card and do not indicate how you want your shares of Devon Common Stock to be voted, then your shares of Devon Common Stock will be voted “FOR” the Stock Issuance Proposal and “FOR” the Devon Adjournment Proposal.

 

Q:

Can I change my vote of shares of WPX Common Stock after I have submitted my proxy?

 

A:

Any stockholder giving a proxy has the right to revoke it before the proxy is voted at the WPX Special Meeting by:

 

   

subsequently submitting a new proxy, whether by submitting a new proxy card or by submitting a proxy via the Internet or telephone, that is received by the deadline specified on the accompanying proxy card;

 

   

giving written notice of your revocation to WPX’s Corporate Secretary;

 

   

voting virtually at the WPX Special Meeting; or

 

   

revoking your proxy and voting at the WPX Special Meeting.

Your attendance at the WPX Special Meeting will not revoke your proxy unless you give written notice of revocation to WPX’s Corporate Secretary before your proxy is exercised or unless you vote your shares in person at the WPX Special Meeting.

Execution or revocation of a proxy will not in any way affect your right to attend the WPX Special Meeting and vote. Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

WPX Energy, Inc.

Attn: Corporate Secretary

3500 One Williams Center

Tulsa, Oklahoma 74172-0172

For more information, please see “WPX Special Meeting—Revocation of Proxies.”

 

Q:

Can I change my vote of shares of Devon Common Stock after I have submitted my proxy?

 

A:

Any stockholder giving a proxy has the right to revoke it before the proxy is voted at the Devon Special Meeting by:

 

   

subsequently submitting a new proxy, whether by submitting a new proxy card or by submitting a proxy via the Internet or telephone, that is received by the deadline specified on the accompanying proxy card;

 

   

giving written notice of your revocation to Devon’s Corporate Secretary;

 

   

voting virtually at the Devon Special Meeting; or

 

   

revoking your proxy and voting at the Devon Special Meeting.

 

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Your attendance at the Devon Special Meeting will not revoke your proxy unless you give written notice of revocation to Devon’s Corporate Secretary before your proxy is exercised or unless you vote your shares in person at the Devon Special Meeting.

Execution or revocation of a proxy will not in any way affect your right to attend the Devon Special Meeting and vote. Written notices of revocation and other communications with respect to the revocation of proxies should be addressed to:

Devon Energy Corporation

Attn: Corporate Secretary

333 W. Sheridan Ave.

Oklahoma City, Oklahoma 73102-5015

For more information, please see “Devon Special Meeting—Revocation of Proxies.”

 

Q:

If I hold my shares in “street name,” can I change my voting instructions after I have submitted voting instructions to my bank, broker or other nominee?

 

A:

If your shares are held in the name of a bank, broker or other nominee and you previously provided voting instructions to your bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee to revoke or change your voting instructions.

 

Q:

Where can I find the voting results of the WPX Special Meeting and the Devon Special Meeting?

 

A:

The preliminary voting results for the WPX Special Meeting and the Devon Special Meeting will be announced at their respective meetings. In addition, within four business days of the WPX Special Meeting and Devon Special Meeting, WPX and Devon intend to file the final voting results of their respective meetings with the SEC on a Current Report on Form 8-K.

 

Q:

Do WPX or Devon stockholders have appraisal rights or dissenters’ rights?

 

A:

No. Neither WPX nor Devon stockholders are entitled to appraisal or dissenters’ rights in connection with the merger under Section 262 of the DGCL.

 

Q:

As a WPX stockholder, are there any risks that I should consider in deciding whether to vote for the approval of the Merger Proposal?

 

A:

Yes. You should read and carefully consider the risk factors set forth in “Risk Factors.” You also should read and carefully consider the risk factors of Devon and WPX contained in the reports of Devon and WPX which are incorporated by reference into this joint proxy statement/prospectus.

 

Q:

As a Devon stockholder, are there any risks that I should consider in deciding whether to vote for the approval of the Stock Issuance Proposal?

 

A:

Yes. You should read and carefully consider the risk factors set forth in “Risk Factors.” You also should read and carefully consider the risk factors of Devon and WPX contained in the reports of Devon and WPX which are incorporated by reference into this joint proxy statement/prospectus.

 

Q:

Do any of the officers or directors of WPX have interests in the merger that may differ from or be in addition to my interests as a WPX stockholder?

 

A:

Yes. In considering the recommendation of the WPX Board that WPX stockholders vote to approve the Merger Proposal, WPX stockholders should be aware that WPX’s directors and executive officers have

 

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  interests in the merger that are different from, or in addition to, the interests of WPX stockholders generally. The WPX Board was aware of and considered these differing interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement and the merger and in unanimously recommending that the Merger Agreement be approved and adopted by WPX stockholders. See “The Merger—Interests of WPX’s Directors and Executive Officers in the Merger.”

 

Q:

Do any of the officers or directors of Devon have interests in the merger that may differ from or be in addition to my interests as a Devon stockholder?

 

A:

Yes. In considering the recommendation of the Devon Board that Devon stockholders vote to approve the Stock Issuance Proposal, Devon stockholders should be aware that Devon’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of Devon stockholders generally. The Devon Board was aware of and considered these differing interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Merger Agreement and the merger and in unanimously recommending that the Stock Issuance Proposal be approved by Devon stockholders. See “The Merger—Interests of Devon’s Directors and Executive Officers in the Merger.”

 

Q:

What happens if I sell my shares of WPX Common Stock after the WPX Record Date but before the WPX Special Meeting?

 

A:

The WPX Record Date is earlier than the date of the WPX Special Meeting. If you transfer your shares of WPX Common Stock after the WPX Record Date but before the WPX Special Meeting, you will, unless special arrangements are made, retain your right to vote at the WPX Special Meeting.

 

Q:

What happens if I sell my shares of Devon Common Stock after the Devon Record Date but before the Devon Special Meeting?

 

A:

The Devon Record Date is earlier than the date of the Devon Special Meeting. If you transfer your shares of Devon Common Stock after the Devon Record Date but before the Devon Special Meeting, you will, unless special arrangements are made, retain your right to vote at the Devon Special Meeting.

 

Q:

Who will solicit and pay the cost of soliciting proxies in connection with the WPX Special Meeting?

 

A:

The WPX Board is soliciting your proxy in connection with the WPX Special Meeting, and WPX will bear the cost of soliciting such proxies, including the costs of printing and mailing this joint proxy statement/prospectus. WPX has retained Georgeson LLC (“Georgeson”) as proxy solicitor to assist with the solicitation of proxies in connection with the WPX Special Meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through banks, brokers and other nominees to the beneficial owners of shares of WPX Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by certain of WPX’s directors, officers and employees, without additional compensation.

Devon and WPX also may be required to reimburse banks, brokers and other custodians, nominees and fiduciaries or their respective agents for their expenses in forwarding proxy materials to beneficial owners of WPX Common Stock. Devon’s directors, officers and employees and WPX’s directors, officers and employees also may solicit proxies by telephone, by electronic means or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

Who will solicit and pay the cost of soliciting proxies in connection with the Devon Special Meeting?

 

A:

The Devon Board is soliciting your proxy in connection with the Devon Special Meeting, and Devon will bear the cost of soliciting such proxies, including the costs of printing and mailing this joint proxy

 

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  statement/prospectus. Devon has retained MacKenzie Partners as proxy solicitor to assist with the solicitation of proxies in connection with the Devon Special Meeting. Solicitation initially will be made by mail. Forms of proxies and proxy materials may also be distributed through banks, brokers and other nominees to the beneficial owners of shares of Devon Common Stock, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses. Proxies may also be solicited in person or by telephone, facsimile, electronic mail, or other electronic medium by certain of Devon’s directors, officers and employees, without additional compensation.

Devon and WPX also may be required to reimburse banks, brokers and other custodians, nominees and fiduciaries or their respective agents for their expenses in forwarding proxy materials to beneficial owners of Devon Common Stock. Devon’s directors, officers and employees and WPX’s directors, officers and employees also may solicit proxies by telephone, by electronic means or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

What are the United States federal income tax consequences of the merger to WPX U.S. stockholders?

 

A:

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. federal income tax purposes. However, it is not a condition to Devon’s obligation or WPX’s obligation to complete the merger that the merger qualifies as a “reorganization.” Nevertheless, assuming that the merger so qualifies, U.S. holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) of shares of WPX Common Stock will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their shares of WPX Common Stock for shares of Devon Common Stock in the merger, except for any gain or loss that may result from the receipt of cash in lieu of a fractional share of Devon Common Stock. Devon and WPX have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”) regarding any matters relating to the merger and, as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein.

For a more complete discussion of the U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

 

Q:

When is the merger expected to be completed?

 

A:

Subject to the satisfaction or waiver of the closing conditions described under “The Merger Agreement—Conditions to the Completion of the Merger,” including the approval of the Merger Proposal and the Stock Issuance Proposal, the merger is expected to close in the fourth quarter of calendar year 2020 or the first quarter of 2021. However, neither Devon nor WPX can predict the actual date on which the merger will be completed, or if the merger will be completed at all, because completion of the merger is subject to conditions and factors outside the control of both companies. Devon and WPX hope to complete the merger as soon as reasonably practicable.

 

Q:

What are the conditions to completion of the merger?

 

A:

The merger is subject to a number of conditions to closing as specified in the Merger Agreement. These closing conditions include, among others, (i) the approval of the Merger Proposal by the WPX stockholders, (ii) the approval of the Stock Issuance Proposal by the Devon stockholders, (iii) that no provision of any applicable law and no order (preliminary or otherwise) is in effect that prohibits the consummation of the merger; (iv) that any waiting period (and any extension of such period) under the Hart Scott Rodino Act (the “HSR Act”) applicable to the transactions contemplated by the Merger Agreement has expired or been terminated; (v) this joint proxy statement/prospectus is effective under the Securities Act and no stop order suspending the use of this joint proxy statement/prospectus has been issued by the SEC, nor have proceedings seeking a stop order been initiated or, to the knowledge of WPX or Devon, as the case may be,

 

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  been threatened by the SEC; and (vi) Devon has filed with the NYSE a subsequent listing application with respect to the shares of Devon Common Stock being issued pursuant to this Merger Agreement and such shares of Devon Common Stock have been approved and authorized for listing on the NYSE. More information may be found in “The Merger Agreement—Conditions to the Completion of the Merger.”

 

Q:

How will I receive the merger consideration to which I am entitled?

 

A:

If you hold your shares of WPX Common Stock through The Depository Trust Company (“DTC”), you will not be required to take any specific actions to exchange your shares of WPX Common Stock for shares of Devon Common Stock. After the completion of the merger, shares of WPX Common Stock held through DTC in book-entry form will be automatically exchanged for shares of Devon Common Stock in book-entry form and an exchange agent (the “Exchange Agent”) selected by the parties will deliver to you a check in the amount of any cash to be paid in lieu of any fractional share of Devon Common Stock to which you would otherwise be entitled. If you hold your shares of WPX Common Stock in certificated form, or in book-entry form but not through DTC, after receiving the proper documentation from you, following the Effective Time, the Exchange Agent will deliver to you the Devon Common Stock and a check in the amount of any cash in lieu of fractional shares to which you would otherwise be entitled. More information may be found in “The Merger Agreement—Exchange of Shares.”

 

Q:

What should I do now?

 

A:

You should read this joint proxy statement/prospectus carefully and in its entirety, including the annexes, and return your completed, signed and dated proxy card by mail in the enclosed postage-paid envelope, or you may submit your voting instructions by telephone or over the Internet as soon as possible so that your shares will be voted in accordance with your instructions.

 

Q:

Whom do I call if I have questions about the WPX Special Meeting, the Devon Special Meeting or the merger?

 

A:

If you are a WPX stockholder and have questions about the WPX Special Meeting or the merger, or desire additional copies of this joint proxy statement/prospectus or additional proxy cards, you may contact:

WPX Energy, Inc.

Attn: Corporate Secretary

3500 One Williams Center

Tulsa, Oklahoma 74172-0172

If you are a Devon stockholder and have questions about the Devon Special Meeting or the merger, or desire additional copies of this joint proxy statement/prospectus or additional proxy cards, you may contact:

Devon Energy Corporation

Attn: Corporate Secretary

333 W. Sheridan Ave.

Oklahoma City, Oklahoma 73102-5015

 

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SUMMARY

For your convenience, provided below is a brief summary of certain information contained in this joint proxy statement/prospectus. This summary highlights selected information from this joint proxy statement/prospectus and does not contain all of the information that may be important to you as a WPX stockholder or Devon stockholder. To understand the merger fully and for a more complete description of the terms of the merger, you should read this entire joint proxy statement/prospectus carefully, including its annexes and the other documents to which you are referred. Additionally, important information, which you are urged to read, is contained in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 216. Items in this summary include a page reference directing you to a more complete description of those items.

The Parties to the Merger (See page 52)

Devon Energy Corporation

Devon is an independent energy company engaged primarily in the exploration, development and production of oil, natural gas and natural gas liquids (“NGLs”). Devon’s operations are concentrated in various onshore areas in the U.S. In June 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada. In October 2020, Devon announced the completion of the sale of its Barnett Shale assets. Devon Common Stock is listed and traded on the NYSE under the ticker symbol “DVN.” Devon, which is incorporated in Delaware, has its executive offices located at 333 W. Sheridan Ave., Oklahoma City, Oklahoma 73102-5015, and can be reached by phone at (405) 235-3611.

WPX Energy, Inc.

WPX is an independent oil and natural gas exploration and production company engaged in the development of long-life unconventional properties. WPX is focused on profitably exploiting, developing and growing its oil positions in the Delaware Basin (a subset of the Permian Basin) in Texas and New Mexico and the Williston Basin in North Dakota. WPX Common Stock is listed and traded on the NYSE under the ticker symbol “WPX.” WPX has its executive offices located at 3500 One Williams Center, Suite 300, Tulsa, Oklahoma 74172-0172, and can be reached by phone at (855) 979-2012.

The Merger and the Merger Agreement (See pages 53 and 107)

The terms and conditions of the merger are contained in the Merger Agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus. You are encouraged to read the Merger Agreement carefully and in its entirety, as it is the primary legal document that governs the merger.

Pursuant to the Merger Agreement, Merger Sub will merge with and into WPX, the separate corporate existence of Merger Sub will cease and WPX will continue as the surviving corporation in the merger as a wholly-owned, direct subsidiary of Devon. Following the merger, WPX Common Stock will be delisted from the NYSE, will be deregistered under the Exchange Act and will cease to be publicly traded.

Exchange Ratio (See page 108)

At the Effective Time, each share of WPX Common Stock will be converted into the right to receive 0.5165 shares of Devon Common Stock.

The Exchange Ratio is fixed, which means that it will not change between now and the Effective Time, regardless of changes in the market price of WPX Common Stock and Devon Common Stock. No fractional



 

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shares of Devon Common Stock will be issued upon the conversion of shares of WPX Common Stock pursuant to the Merger Agreement. Each WPX stockholder who otherwise would have been entitled to receive a fraction of a share of Devon Common Stock will be entitled to receive cash in lieu of such fractional share.

Devon stockholders will continue to own their existing shares of Devon Common Stock, and it is expected that Devon stockholders will own approximately 57% of the Devon Common Stock and WPX stockholders will own approximately 43% of the Devon Common Stock immediately following the Effective Time.

The Devon Special Meeting (See page 149)

The Devon Special Meeting will be held virtually at www.virtualshareholdermeeting.com/DVN2020SM, on December 30, 2020, at 9:30, Central Time. The Devon Special Meeting is being held to consider and vote on the following proposals:

 

   

to approve the Stock Issuance Proposal; and

 

   

to approve the Devon Adjournment Proposal.

Completion of the merger is conditioned on, among other things, the approval of the Stock Issuance Proposal by Devon stockholders. Approval of the Devon Adjournment Proposal is not a condition to the obligation of either WPX or Devon to complete the merger.

Only holders of record of outstanding shares of Devon Common Stock as of the close of business on November 4, 2020, the Devon Record Date, are entitled to notice of, and to vote at, the Devon Special Meeting or any adjournment or postponement of the Devon Special Meeting. Devon stockholders may cast one vote for each share of Devon Common Stock owned as of the Devon Record Date for each proposal.

Assuming holders of a majority of the outstanding shares of Devon Common Stock entitled to vote at a meeting of stockholders (for purposes of the Devon Special Meeting, a “quorum”) are present in person or represented by proxy at the Devon Special Meeting, approval of the Stock Issuance Proposal requires the affirmative vote of holders of a majority of the shares of Devon Common Stock present in person or represented by proxy at the Devon Special Meeting entitled to vote thereon. Accordingly, with respect to a Devon stockholder who is present in person or represented by proxy at the Devon Special Meeting, such stockholder’s abstention from voting or the failure of a Devon stockholder to vote will have the same effect as a vote “against” the Stock Issuance Proposal. The failure of a Devon stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to the bank, broker or other nominee will have no effect on the outcome of the Stock Issuance Proposal. However, if a Devon stockholder instructs its bank, broker or other nominee regarding the Devon Adjournment Proposal but not the Stock Issuance Proposal, such broker non-vote will have the same effect as voting “against” the Stock Issuance Proposal.

Approval of the Devon Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of Devon Common Stock present in person or represented by proxy at the Devon Special Meeting and entitled to vote thereon. Accordingly, with respect to a Devon stockholder who is present in person or represented by proxy at the Devon Special Meeting, such stockholder’s abstention from voting or the failure of a Devon stockholder to vote will have the same effect as a vote “against” the Devon Adjournment Proposal. The failure of a Devon stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to its bank, broker or other nominee will have no effect on the outcome of the Devon Adjournment Proposal. However, if a Devon stockholder instructs its bank, broker or other nominee regarding the Stock Issuance Proposal but not Devon Adjournment Proposal, such broker non-vote will have the same effect as voting “against” the Devon Adjournment Proposal. Regardless of whether there is a quorum, the chairman of the Devon Special Meeting may also adjourn the Devon Special Meeting.



 

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Under the Devon Bylaws, virtual attendance at the special meeting constitutes presence in person for purposes of the vote required.

Recommendation of the Devon Board and its Reasons for the Merger (See page 64)

The Devon Board has unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, Devon and its stockholders and has unanimously adopted, approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the merger. The Devon Board unanimously recommends that Devon stockholders vote “FOR” the Stock Issuance Proposal and “FOR” the Devon Adjournment Proposal, if necessary or appropriate to solicit additional proxies. For additional information on the factors considered by the Devon Board in reaching this decision and the recommendation of the Devon Board, please see “The Merger—Recommendation of the Devon Board and its Reasons for the Merger.”

Opinion of Devon’s Financial Advisor (See page 67)

Pursuant to an engagement letter, Devon retained J.P. Morgan Securities LLC (“J.P. Morgan”) as its financial advisor in connection with the proposed merger.

At the meeting of the Devon Board on September 26, 2020, J.P. Morgan rendered its oral opinion to the Devon Board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the Exchange Ratio in the proposed merger was fair, from a financial point of view, to Devon. J.P. Morgan confirmed its September 26, 2020 oral opinion by delivering its written opinion, dated September 26, 2020, to the Devon Board that, as of such date, the Exchange Ratio in the proposed merger was fair, from a financial point of view, to Devon.

The full text of the written opinion of J.P. Morgan, dated September 26, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Devon stockholders are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the Devon Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the Exchange Ratio in the proposed merger and did not address any other aspect of the proposed merger. The opinion does not constitute a recommendation to any stockholder of Devon as to how such stockholder should vote with respect to the Stock Issuance Proposal or any other matter. For a description of the opinion that the Devon Board received from J.P. Morgan, see the section entitled “The Merger—Opinion of Devon’s Financial Advisor” beginning on page 67.

Interests of Devon’s Directors and Executive Officers in the Merger (See page 99)

When considering the recommendation of the Devon Board that Devon stockholders vote “FOR” the Stock Issuance Proposal, Devon stockholders should be aware that Devon’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of other Devon stockholders generally. The Devon Board was aware of these interests when it approved the Merger Agreement and the transactions contemplated thereby and recommended that Devon stockholders vote “FOR” the Stock Issuance Proposal. Such interests include the following and are more fully summarized below:

 

   

Certain directors and executive officers are expected to continue as directors and executive officers of Devon following consummation of the merger. In addition, Mr. Hager has entered into an agreement



 

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with Devon providing for his continued service as Executive Chair of Devon upon consummation of the merger.

 

   

The Devon executive officers are party to employment or severance agreements with Devon that would provide them with certain severance benefits if their employment is terminated either by Devon without cause or by the executive with good reason, although presently it is expected that only Mr. Taylor’s employment will terminate in connection with the merger.

 

   

The executive officers of Devon hold restricted shares of Devon stock and performance share units in respect of Devon stock. If an executive’s employment is terminated either by Devon without cause or by the executive for good reason, the restricted shares would vest at the time of employment termination and the performance share units would remain eligible to vest based on actual Devon performance notwithstanding the employment termination.

 

   

The executive officers of Devon will become entitled to the distribution of their nonqualified deferred compensation plan benefits by reason of the consummation of the merger. The consummation of the merger alone will not increase the amount of those benefits (other than an increase for Mr. Ritenour and Ms. Cashion under one plan by reason of the application of pre-existing unreduced early commencement factors not implemented in contemplation of the merger), though benefits for Mr. Hager under one plan would be enhanced upon a qualifying termination of employment following consummation of the merger. The executives are all already vested in all of their existing benefits.

The merger does not constitute a “change in control” for purposes of the executives’ employment and severance arrangements or their equity award agreements, and accordingly the benefits potentially provided under those agreements are not enhanced by reason of the merger. Because Devon’s nonqualified deferred compensation plans include a definition of “change in control” that is commonly applied to such plans under a provision of the Code, the merger accelerates the payment of vested benefits under those plans in a manner that could not be waived by the executives without violating applicable tax laws.

The WPX Special Meeting (See page 157)

The WPX Special Meeting will be held virtually at www.meetingcenter.io/279855004, on December 30, 2020, at 9:30 a.m., Central Time. The WPX Special Meeting is being held to consider and vote on the following proposals:

 

   

to approve the Merger Proposal;

 

   

to approve the Advisory Compensation Proposal; and

 

   

to approve the WPX Adjournment Proposal.

Completion of the merger is conditioned on, among other things, the approval of the Merger Proposal by WPX stockholders. Approval of the WPX Adjournment Proposal and the Advisory Compensation Proposal are not conditions to the obligation of either WPX or Devon to complete the merger.

Only holders of record of outstanding shares of WPX Common Stock as of the close of business on November 4, 2020, the WPX Record Date, are entitled to notice of, and to vote at, the WPX Special Meeting or any adjournment or postponement of the WPX Special Meeting. WPX stockholders may cast one vote for each share of WPX Common Stock owned as of the WPX Record Date for each proposal.

Assuming holders of a majority of the outstanding shares of WPX Common Stock entitled to vote at a meeting of stockholders (for purposes of the WPX Special Meeting, a “quorum”) are present in person or represented by proxy at the WPX Special Meeting, approval of the Merger Proposal requires the affirmative vote



 

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of holders of a majority of the outstanding shares of WPX Common Stock entitled to vote on the proposal. Accordingly, a WPX stockholders abstention from voting or the failure of a WPX stockholder to vote (including the failure of a WPX stockholder who holds shares in street name through a bank, broker or other nominee to give voting instructions to that bank, broker or other nominee) will have the same effect as a vote against the Merger Proposal.

Under the WPX Bylaws, approval of the WPX Adjournment Proposal and, assuming a quorum is present, the Advisory Compensation Proposal requires the affirmative vote of the holders of a majority of the WPX Common Stock entitled to vote thereon and present in person or represented by proxy at the WPX Special Meeting. Accordingly, with respect to a WPX stockholder who is present in person or represented by proxy at the WPX Special Meeting and who abstains, such stockholder’s abstention will be counted in connection with the determination of whether a quorum is present and will have the same effect as a vote “against” each of the Advisory Compensation Proposal and the WPX Adjournment Proposal. However, the failure of a WPX stockholder to vote on either proposal, as well as the failure of a WPX stockholder who holds shares in “street name” through a bank, broker or other nominee to give voting instructions to the bank, broker or other nominee, will have no effect on either of the Advisory Compensation Proposal or the WPX Adjournment Proposal.

Under the WPX Bylaws, virtual attendance at the WPX Special Meeting constitutes presence in-person for purposes of the vote required.

EnCap Support Agreement (See page 147)

Contemporaneously with the execution of the Merger Agreement, Devon entered into the EnCap Support Agreement (a copy of which is attached as Annex D to this joint proxy statement/prospectus) with certain WPX stockholders affiliated with EnCap Investments L.P., pursuant to which EnCap agreed, among other things, subject to the terms and conditions thereof, to vote all of the shares of WPX Common Stock held by EnCap as of such date in favor of the Merger Proposal at the WPX Special Meeting. For more information, please see “The Merger Agreement—EnCap Support Agreement.” For more information regarding the security ownership of EnCap, please see “Certain Beneficial Owners of WPX Common Stock.”

Recommendation of the WPX Board and its Reasons for the Merger (See page 73)

The WPX Board has unanimously determined that the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement are in the best interests of, and are advisable to, WPX and its stockholders and has unanimously approved and declared advisable the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. The WPX Board unanimously recommends that WPX stockholders vote “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal, and “FOR” the WPX Adjournment Proposal, if necessary or appropriate to solicit additional proxies. For additional information on the factors considered by the WPX Board in reaching this decision and the recommendation of the WPX Board, please see “The Merger—Recommendation of the WPX Board and its Reasons for the Merger.”

Opinion of WPX’s Financial Advisor (See page 78)

WPX has engaged Citigroup Global Markets Inc. (“Citi”) as its financial advisor in connection with the proposed merger. In connection with this engagement, Citi delivered a written opinion, dated September 26, 2020, to the WPX Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Exchange Ratio provided for pursuant to the Merger Agreement. The full text of Citi’s written opinion, dated September 26, 2020, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, is attached as Annex C to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference. The description



 

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of Citi’s opinion set forth herein is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the WPX Board (in its capacity as such) in connection with its evaluation of the Exchange Ratio from a financial point of view and did not address any other terms, aspects or implications of the merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of WPX to effect or enter into the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for WPX or the effect of any other transaction which WPX might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation as to how the WPX Board or any securityholder should vote or act on any matters relating to the proposed merger or otherwise.

Interests of WPX’s Directors and Executive Officers in the Merger (See page 92)

When considering the recommendation of the WPX Board that WPX stockholders vote “FOR” the Merger Proposal, WPX stockholders should be aware that, aside from their interests as WPX stockholders, WPX’s directors and executive officers have interests in the merger that are different from, or in addition to, the interests of other WPX stockholders generally. The WPX Board was aware of such interests during its deliberations on the merits of the merger and in deciding to recommend that WPX stockholders vote “FOR” the Merger Proposal at the WPX Special Meeting on December 30, 2020.

These interests include:

 

   

the executive officers of WPX have arrangements with WPX that provide for certain severance payments or benefits, accelerated vesting of certain equity-based awards and other rights and other payments or benefits in the event of a qualifying termination of employment following the completion of the merger;

 

   

certain executive officers of WPX have received offers of employment by Devon contingent upon and subject to the consummation of the merger;

 

   

the directors of WPX have arrangements with WPX that provide for accelerated vesting of certain equity-based awards in the event of a qualifying termination of services following the completion of the merger; and

 

   

executive officers and directors of WPX have rights to indemnification, advancement of expenses and directors’ and officers’ liability insurance that will survive the completion of the merger.

The WPX Board was aware of these additional interests of their directors and executive officers and considered these potential interests, among other matters, in evaluating and negotiating the Merger Agreement and the merger, in approving the Merger Agreement and in recommending the applicable merger-related proposals. For a further discussion of the interests of WPX directors and executive officers in the merger, see “The Merger—Interests of WPX’s Directors and Executive Officers in the Merger” beginning on page 92.

Treatment of Existing WPX Long-Term Incentive Awards in the Merger (See page 109)

At the Effective Time, each stock option issued under a WPX benefit plan (a “WPX Stock Option”) that is outstanding immediately prior to the Effective Time and that by its terms does not settle by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, cease to represent an option to purchase shares of WPX Common Stock and be converted into an option to purchase a number of shares of Devon Common Stock (such option, a “Converted Stock Option”) equal to the product (with the result rounded down to the nearest whole number) of (i) the number of shares of WPX Common Stock subject to each such WPX Stock Option immediately prior to the Effective Time multiplied by (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest



 

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whole cent) equal to (A) the exercise price per share of WPX Common Stock of such WPX Stock Option immediately prior to the Effective Time divided by (B) the Exchange Ratio; provided, however, that the exercise price and the number of shares of Devon Common Stock purchasable pursuant to the Converted Stock Option will be determined in a manner consistent with the requirements of Section 409A of the Code and, as applicable, Section 422 of the Code. Immediately following the Effective Time, each Converted Stock Option otherwise will continue to be governed by the same terms and conditions (including vesting, forfeiture and exercisability terms) as were applicable to the corresponding WPX Stock Option immediately prior to the Effective Time.

At the Effective Time, each restricted stock unit (including those subject to performance-based vesting conditions) under a WPX benefit plan (a “WPX RSU”) that is outstanding immediately prior to the Effective Time and that by its terms does not settle by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, be assumed by Devon and converted into a number of restricted stock units with respect to shares (rounded to the nearest number of whole shares) of Devon Common Stock (such restricted stock unit, a “Converted RSU”) equal to the product of the number of shares of WPX Common Stock subject to the WPX RSU immediately prior to the Effective Time multiplied by the Exchange Ratio. Immediately following the Effective Time, each Converted RSU otherwise will continue to be governed by the same terms and conditions (including vesting and forfeiture) as were applicable to the corresponding WPX RSU immediately prior to the Effective Time, except that any performance-based vesting condition that applied to the WPX RSU immediately prior to the Effective Time will be treated as having been attained based on actual results measured using the average five-day closing price of WPX Common Stock ending on the day immediately preceding the date of closing, as determined by the Compensation Committee of the WPX Board, so that such WPX RSU will remain solely subject to the time-based vesting requirements in effect for the WPX RSU immediately prior to the Effective Time.

At the Effective Time, each restricted stock award under a WPX benefit plan (“WPX RSA”) that is outstanding immediately prior to the Effective Time and that by its terms does not vest by reason of the occurrence of the closing will, by virtue of the occurrence of the closing and without any action by Devon, Merger Sub, WPX or the holder thereof, be converted pursuant to the Merger Agreement into shares of Devon Common Stock and assumed by Devon, except the number of shares subject to such award will be rounded up to the nearest number of whole shares (such restricted stock award, a “Converted RSA”). Immediately following the Effective Time, each Converted RSA otherwise will continue to be governed by the same terms and conditions (including vesting, forfeiture and transferability terms) as were applicable to the corresponding WPX RSA immediately prior to the Effective Time.

WPX’s 2011 Employee Stock Purchase Plan (the “ESPP”) will terminate as of immediately prior to the date of closing. For any offering period in effect under the ESPP prior to the closing, WPX will establish a new exercise date to be set under the ESPP, which date will be no later than five business days prior to the Effective Time (the “ESPP Exercise Date”), with the automatic purchase of WPX Common Stock with respect to accumulated employee contributions of each participant under the ESPP in respect of such offering period to occur on such date. WPX will prohibit participants in the ESPP from altering their payroll deductions from those in effect on the date of the Merger Agreement (other than to discontinue their participation in the ESPP in accordance with the terms and conditions of the ESPP). The amount of the accumulated contributions of each participant under the ESPP as of immediately prior to the ESPP Exercise Date will, to the extent not used to purchase WPX Common Stock in accordance with the terms and conditions of the ESPP and the Merger Agreement, be refunded (without interest) to such participant as promptly as practicable following the Effective Time.

The Merger Agreement further provides that WPX will take all necessary and appropriate actions to approve and effectuate the above, including making any determinations or adopting resolutions of the WPX Board or a committee thereof or any administrator of a WPX benefit plan as may be necessary. Devon must also take such



 

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actions as are necessary for the conversion of the WPX RSUs, WPX RSAs and WPX Stock Options pursuant to the Merger Agreement, including reservation, issuance and listing of shares of Devon Common Stock as are necessary to effectuate the transactions contemplated by the above.

Treatment of Indebtedness

As of September 30, 2020, Devon had no borrowings outstanding and $2 million in outstanding letters of credit issued under that certain Credit Agreement, dated as of October 5, 2018, among Devon, as borrower, Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer, and the lenders and letter of credit issuers from time to time party thereto, as amended by that First Amendment to Credit Agreement and Extension Agreement, dated as of December 13, 2019, and as further amended, restated, supplemented or otherwise modified from time to time (the “Devon Credit Agreement”).

The Merger Agreement requires WPX to, at Devon’s request, use commercially reasonable efforts to (i) commence any of (A) one or more offers to purchase any or all of the outstanding series of WPX’s 6.000% Senior Notes due 2022, 8.250% Senior Notes due 2023, 5.250% Senior Notes due 2024, 5.750% Senior Notes due 2026, 5.250% Senior Notes due 2027, 5.875% Senior Notes due 2028 and 4.500% Senior Notes due 2030 (the “WPX Notes”) for cash or (B) one or more offers to exchange any or all of the outstanding WPX Notes for securities issued by Devon or any of its controlled affiliates; and (ii) conduct consent solicitations to obtain from the requisite holders thereof consent to certain amendments to such indentures. No such offer to purchase or offer to exchange will be consummated prior to the closing date and any such transactions will be funded using consideration provided by Devon.

As of September 30, 2020, WPX had (i) no borrowings outstanding and $13 million in letters of credit issued under that certain Second Amended and Restated Credit Agreement, dated as of March 18, 2016, among WPX, as borrower, Wells Fargo Bank, National Association, as administrative agent and swingline lender, and the lenders from time to time party thereto, as amended by that certain Second Amendment to Second Amended and Restated Credit Agreement and First Amendment to Guaranty and Collateral Agreement, dated as of April 17, 2018, as further amended by that certain Third Amendment to Second Amended and Restated Credit Agreement, dated as of April 22, 2019, as further amended by that certain Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of September 16, 2019, and as further amended, restated, supplemented or otherwise modified from time to time (the “WPX Credit Agreement”) and (ii) no borrowings outstanding under its loan agreement, by and among WPX Energy Headquarters, LLC, as borrower, the lenders from time to time party thereto, and BOKF, NA dba Bank of Oklahoma, as administrative agent, dated as of January 13, 2020, and as further amended, restated, supplemented or otherwise modified from time to time (the “WPX loan agreement”). Unless the WPX Credit Agreement is terminated or amended prior to or at the closing date of the merger, consummation of the merger would constitute a “Change in Control” and result in an event of default under the WPX Credit Agreement. The Merger Agreement requires WPX to deliver to Devon, prior to or at the closing date of the merger, customary executed payoff letters for the repayment in full of all indebtedness, and terminate all commitments, under, and discharge and release all guarantees and liens existing in connection with each of the WPX Credit Agreement and the WPX loan agreement.

For a description of WPX’s existing indebtedness, see WPX’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020, filed with the SEC on November 3, 2020, which is incorporated by reference into this joint proxy statement/prospectus.

Certain Beneficial Owners of WPX Common Stock (See page 209)

At the close of business on November 18, 2020, the latest practicable date prior to the date of this joint proxy statement/prospectus, WPX’s directors and executive officers and their affiliates, as a group, beneficially



 

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owned and were entitled to vote approximately 7,153,627 shares of WPX Common Stock, collectively representing 1.27% of the shares of WPX Common Stock outstanding on that date. WPX currently expects that all of its directors and executive officers will vote their shares “FOR” the Merger Proposal, “FOR” the Advisory Compensation Proposal and “FOR” the WPX Adjournment Proposal (if necessary). For more information regarding the security ownership of WPX directors and executive officers, please see “Certain Beneficial Owners of WPX Common Stock.”

In addition, pursuant to the EnCap Support Agreement, EnCap (which beneficially owned approximately 27.3% of the outstanding shares of WPX Common Stock as of November 18, 2020) has agreed, subject to the terms and conditions thereof, to vote all shares of WPX Common Stock held by EnCap as of such date in favor of the Merger Proposal at the WPX Special Meeting. For a more complete discussion of the EnCap Support Agreement, please see “The Merger Agreement—EnCap Support Agreement.”

Ownership of Devon after the Merger

As of the date of this joint proxy statement/prospectus, based on the Exchange Ratio, the number of outstanding shares of WPX Common Stock (plus the number of shares underlying outstanding WPX RSUs) and the number of outstanding shares of Devon Common Stock (on a fully diluted basis), it is estimated that Devon stockholders will own approximately 57% and WPX stockholders will own approximately 43% of the issued and outstanding shares of Devon Common Stock on a fully diluted basis immediately following the Effective Time.

Board of Directors and Management of Devon Following the Merger (See page 91)

The Devon Board at the Effective Time will be composed of the (i) Legacy Devon Directors and (ii) Legacy WPX Directors. At the Effective Time, a Legacy WPX Director who is mutually acceptable to Devon and WPX will be appointed the Lead Independent Director of the Devon Board.

The management of Devon following the completion of the merger will include officers and other key employees from both Devon and WPX. At the Effective Time, the senior leadership team of Devon will consist of: (i) David A. Hager, the current President and Chief Executive Officer of Devon, who will be appointed as the Executive Chairman of Devon; (ii) Richard E. Muncrief, the current Chairman and Chief Executive Officer of WPX, who will be appointed as President and Chief Executive Officer of Devon; (iii) Clay M. Gaspar, the current President and Chief Operating Officer of WPX, who will be appointed as the Executive Vice President and Chief Operating Officer of Devon; (iv) Jeffrey L. Ritenour, the current Executive Vice President and Chief Financial Officer of Devon, who will continue to serve in that position; (v) David G. Harris, the current Executive Vice President, Exploration and Production of Devon, who will be appointed as the Executive Vice President and Chief Corporate Development Officer of Devon; (vi) Dennis C. Cameron, the current Executive Vice President and General Counsel of WPX, who will be appointed as the Executive Vice President and General Counsel of Devon; and (vii) Tana K. Cashion, the current Senior Vice President, Human Resources of Devon, who will continue to serve in that position. For additional information regarding the Devon Board and the management of Devon following the completion of the merger, please see “The Merger Agreement—Board of Directors and Executive Officers After Completion of the Merger.”

Conditions to the Completion of the Merger (See page 142)

Each party’s obligation to effect the merger is subject to the satisfaction at closing, or waiver at or prior to closing, of each of the following conditions:

 

   

the approval of the Merger Proposal by the WPX stockholders;

 

   

the approval of the Stock Issuance Proposal by the Devon stockholders;



 

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the absence of any applicable law or order (preliminary or otherwise) prohibiting the consummation of the merger;

 

   

the expiration or earlier termination of the waiting period (and any extension of such period) under the HSR Act;

 

   

the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, will have become effective under the Securities Act and no stop order suspending the effectiveness may be in effect; and

 

   

the NYSE having approved the listing of the shares of Devon Common Stock to be issued in the merger.

In addition, Devon’s and Merger Sub’s obligation to effect the merger is subject to the satisfaction at closing, or waiver at or prior to closing, of each of the following conditions:

 

   

the accuracy of the representations and warranties of WPX as follows:

 

     

the representations and warranties of WPX regarding organization, the delivery of organizational documents, authority and certain representations regarding capital stock (as set forth in the first sentence of Section 2.1(a), Section 2.1(c), Section 2.2 and Section 2.4 of the Merger Agreement) shall be true and correct in all respects as of the date of the Merger Agreement and as of the closing date, as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date), except for de minimis inaccuracies;

 

     

the representations and warranties of WPX regarding the absence of certain changes or developments that have had, or would reasonably be expected to have, a material adverse effect (as set forth in Section 2.8(b) of the Merger Agreement) shall be true and correct in all respects as of the date of the Merger Agreement and as of the closing date, as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date); and

 

     

each other representation and warranty of WPX set forth in the Merger Agreement shall be true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) as of the date of the Merger Agreement and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) would not reasonably have been expected to have, individually or in the aggregate, a material adverse effect on WPX.

 

   

WPX’s performance or compliance in all material respects with all of its covenants, obligations or agreements required to be performed or complied with under the Merger Agreement prior to the Effective Time; and

 

   

WPX having delivered to Devon a certificate of a duly authorized officer certifying the matters of the immediately preceding bullets.

WPX’s obligation to effect the merger is subject to the satisfaction at closing, or waiver at or prior to closing, of each of the following conditions:

 

   

the accuracy of the representations and warranties of Devon as follows:

 

     

the representations and warranties of Devon regarding organization, the delivery of organizational documents, authority and certain representations regarding capital stock (as set forth in the first sentence of Section 3.1(a), Section 3.1(c), Section 3.2 and Section 3.4 of the Merger Agreement)



 

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shall be true and correct in all respects as of the date of the Merger Agreement and as of the closing date, as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date), except for de minimis inaccuracies;

 

     

the representations and warranties of Devon regarding the absence of certain changes or developments that have had, or would reasonably be expected to have, a material adverse effect (as set forth in Section 3.8(b) of the Merger Agreement) shall be true and correct in all respects as of the date of the Merger Agreement and as of the closing date, as if made as of such date (except to the extent expressly made as of an earlier date, in which case as of such date); and

 

     

each other representation and warranty of Devon set forth in the Merger Agreement shall be true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) as of the date of the Merger Agreement and as of the closing date (except to the extent expressly made as of an earlier date, in which case as of such date), except where the failure of such representations and warranties to be so true and correct (without giving effect to any limitation as to “materiality” or “material adverse effect” set forth in any individual such representation or warranty) would not reasonably have been expected to have, individually or in the aggregate, a material adverse effect on Devon.

 

   

Devon’s performance or compliance in all material respects with all of its covenants, obligations or agreements required to be performed or complied with under the Merger Agreement prior to the Effective Time; and

 

   

Devon having delivered to WPX a certificate of a duly authorized officer certifying the matters of the immediately preceding bullets.

No Solicitation of Acquisition Proposals by WPX (See page 126)

WPX agreed that, except as expressly contemplated by the Merger Agreement, neither it nor any of its subsidiaries will, and WPX will use its reasonable best efforts to, and will cause each of its subsidiaries to use its respective reasonable best efforts to, cause their respective representatives not to:

 

   

directly or indirectly initiate or solicit, or knowingly encourage or knowingly facilitate (including by way of furnishing non-public information relating to WPX or any of its subsidiaries) any inquiries or the making or submission of any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal with respect to WPX;

 

   

other than clarifying terms of the Acquisition Proposal in accordance with the Merger Agreement, participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to WPX or any of its subsidiaries or afford access to the properties, books or records of WPX or any of its subsidiaries to any person that has made an Acquisition Proposal with respect to WPX or to any person in contemplation of making an Acquisition Proposal with respect to WPX; or

 

   

accept an Acquisition Proposal with respect to WPX or enter into any agreement, including any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement, arrangement or understanding:

 

     

constituting or related to, or that is intended to or could reasonably be expected to lead to, any Acquisition Proposal with respect to WPX (other than an acceptable confidentiality agreement permitted pursuant to the Merger Agreement); or

 

     

requiring, intending to cause, or which could reasonably be expected to cause WPX to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the Merger Agreement (each, a “WPX Acquisition Agreement”).



 

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Any violation of the preceding restrictions by subsidiaries or representatives of WPX or any representative of any subsidiary of WPX, whether or not such representative is so authorized and whether or not such representative is purporting to act on behalf of WPX or any of its subsidiaries or otherwise, will be deemed to be a breach of the Merger Agreement by WPX.

Notwithstanding anything to the contrary in the Merger Agreement, prior to obtaining the approval of the Merger Proposal by WPX’s stockholders, WPX and the WPX Board may take any actions described in the immediately preceding second bullet with respect to a third party if (i) after the date of the Merger Agreement, WPX receives a written Acquisition Proposal with respect to WPX from such third party (and such Acquisition Proposal was not initiated, solicited, knowingly encouraged or knowingly facilitated by WPX or any of its subsidiaries or any representative of WPX or any of its subsidiaries), (ii) WPX provides Devon the notice required by the Merger Agreement with respect to such Acquisition Proposal, (iii) the WPX Board determines in good faith (after consultation with WPX’s financial advisors and outside legal counsel) that such proposal constitutes or could reasonably be expected to lead to a superior proposal with respect to WPX and (iv) the WPX Board determines in good faith (after consultation with WPX’s outside legal counsel) that the failure to participate in such discussions or negotiations or to disclose such information or data to such third party would be inconsistent with its fiduciary duties; provided that WPX will not deliver any information to such third party without first entering into an acceptable confidentiality agreement with such third party.

Notwithstanding the limitations described above, and subject to compliance with certain of WPX’s obligations contained in the non-solicitation provisions of the Merger Agreement, if WPX receives, following the date of the Merger Agreement and prior to the WPX Special Meeting, an unsolicited bona fide written Acquisition Proposal that did not result from a knowing and intentional breach of the non-solicitation provisions of the Merger Agreement, WPX and its representatives may contact the person or any of such person’s representatives who has made such Acquisition Proposal solely to clarify the terms of such Acquisition Proposal so that WPX may inform itself about such Acquisition Proposal.

Nothing described above will prohibit WPX or the WPX Board from taking and disclosing to the WPX stockholders a position with respect to an Acquisition Proposal with respect to WPX pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any similar disclosure, in either case to the extent required by law.

No Solicitation of Acquisition Proposals by Devon (See page 127)

Devon agreed that, except as expressly contemplated by the Merger Agreement, neither it nor any of its subsidiaries will, and Devon will use its reasonable best efforts to, and will cause each of its subsidiaries to use its respective reasonable best efforts to, cause their respective representatives not to:

 

   

directly or indirectly initiate or solicit, or knowingly encourage or knowingly facilitate (including by way of furnishing non-public information relating to Devon or any of its subsidiaries) any inquiries or the making or submission of any proposal that constitutes, or could reasonably be expected to lead to, an Acquisition Proposal with respect to Devon;

 

   

other than clarifying terms of the Acquisition Proposal in accordance with the Merger Agreement, participate or engage in discussions or negotiations with, or disclose any non-public information or data relating to Devon or any of its subsidiaries or afford access to the properties, books or records of Devon or any of its subsidiaries to any person that has made an Acquisition Proposal with respect to Devon or to any person in contemplation of making an Acquisition Proposal with respect to Devon; or

 

   

accept an Acquisition Proposal with respect to Devon or enter into any agreement, including any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition



 

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agreement, option agreement, joint venture agreement, partnership agreement or other similar agreement, arrangement or understanding:

 

     

constituting or related to, or that is intended to or could reasonably be expected to lead to, any Acquisition Proposal with respect to Devon (other than an acceptable confidentiality agreement permitted pursuant to the Merger Agreement); or

 

     

requiring, intending to cause, or which could reasonably be expected to cause Devon to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the Merger Agreement (each, a “Devon Acquisition Agreement”).

Any violation of the preceding restrictions by subsidiaries or representatives of Devon or any representative of any subsidiary of Devon, whether or not such representative is so authorized and whether or not such representative is purporting to act on behalf of Devon or any of its subsidiaries or otherwise, will be deemed to be a breach of the Merger Agreement by Devon.

Notwithstanding anything to the contrary in the Merger Agreement, prior to obtaining the approval of the Stock Issuance Proposal by Devon’s stockholders, Devon and the Devon Board may take any actions described in the immediately preceding second bullet with respect to a third party if (i) after the date of the Merger Agreement, Devon receives a written Acquisition Proposal with respect to Devon from such third party (and such Acquisition Proposal was not initiated, solicited, knowingly encouraged or knowingly facilitated by Devon or any of its subsidiaries or any representative of Devon or any of its subsidiaries), (ii) Devon provides WPX the notice required by the Merger Agreement with respect to such Acquisition Proposal, (iii) the Devon Board determines in good faith (after consultation with Devon’s financial advisors and outside legal counsel) that such proposal constitutes or could reasonably be expected to lead to a superior proposal with respect to Devon and (iv) the Devon Board determines in good faith (after consultation with Devon’s outside legal counsel) that the failure to participate in such discussions or negotiations or to disclose such information or data to such third party would be inconsistent with its fiduciary duties; provided that Devon will not deliver any information to such third party without first entering into an acceptable confidentiality agreement with such third party.

Notwithstanding the limitations described above, and subject to compliance with certain of Devon’s obligations contained in the non-solicitation provisions of the Merger Agreement, if Devon receives, following the date of the Merger Agreement and prior to the Devon Special Meeting, an unsolicited bona fide written Acquisition Proposal that did not result from a knowing and intentional breach of the non-solicitation provisions of the Merger Agreement, Devon and its representatives may contact the person or any of such person’s representatives who has made such Acquisition Proposal solely to clarify the terms of such Acquisition Proposal so that Devon may inform itself about such Acquisition Proposal.

Nothing described above will prohibit Devon or the Devon Board from taking and disclosing to the Devon stockholders a position with respect to an Acquisition Proposal with respect to Devon pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any similar disclosure, in either case to the extent required by law.

No Change of Recommendation by WPX (See page 129)

The Merger Agreement provides that neither:

 

   

the WPX Board nor any committee thereof will directly or indirectly:

 

     

withhold or withdraw (or amend, modify or qualify in a manner adverse to Devon or Merger Sub), or publicly propose or announce any intention to withhold or withdraw (or amend, modify or qualify in a manner adverse to Devon or Merger Sub), the recommendation that the WPX



 

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stockholders adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement (the “WPX Recommendation”); or

 

     

recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Acquisition Proposal with respect to WPX (any action described in this first bullet being referred to as a “WPX Adverse Recommendation Change”); nor

 

   

WPX nor any of its subsidiaries will execute or enter into a WPX Acquisition Agreement.

Permitted Change of Recommendation—Superior Proposal

Notwithstanding the provisions of the Merger Agreement described above, at any time prior to obtaining the approval of the Merger Proposal by WPX’s stockholders, and subject to WPX’s compliance in all material respects at all times with the non-solicitation and stockholder meeting provisions of the Merger Agreement, in response to a superior proposal with respect to WPX that was not initiated, solicited, knowingly encouraged or knowingly facilitated by WPX or any of the subsidiaries of WPX or any of their respective representatives, the WPX Board may make a WPX Adverse Recommendation Change; provided, however, that WPX will not be entitled to exercise its right to make a WPX Adverse Recommendation Change in response to a superior proposal with respect to WPX (i) until three business days after WPX provides written notice to Devon (a “WPX Notice”) advising Devon that the WPX Board or a committee thereof has received a superior proposal, specifying the material terms and conditions of such superior proposal, and identifying the person or group making such superior proposal, (ii) if during such three-business-day period, Devon proposes any alternative transaction (including any modifications to the terms of the Merger Agreement), unless the WPX Board determines in good faith (after consultation with WPX’s financial advisors and outside legal counsel, and taking into account all financial, legal, and regulatory terms and conditions of such alternative transaction proposal, including any conditions to and expected timing of consummation, and any risks of non-consummation of such alternative transaction proposal) that such alternative transaction proposal is not at least as favorable to WPX and its stockholders as the superior proposal (it being understood that any change in the financial or other material terms of a superior proposal will require a new WPX Notice and a new two-business-day period) and (iii) unless the WPX Board, after consultation with outside legal counsel, determines that the failure to make a WPX Adverse Recommendation Change would be inconsistent with its fiduciary duties.

Permitted Change of Recommendation—Intervening Event

Notwithstanding the provisions of the Merger Agreement described above, at any time prior to obtaining the approval of the Merger Proposal by WPX’s stockholders, and subject to WPX’s compliance in all material respects at all times with the non-solicitation and stockholder meeting provisions of the Merger Agreement, in response to a WPX Intervening Event (as defined in “The Merger Agreement—No Change of Recommendation—WPX”), the WPX Board may make a WPX Adverse Recommendation Change described in clause (i) of the definition thereof if the WPX Board:

 

   

determines in good faith, after consultation with WPX’s outside legal counsel and any other advisor it chooses to consult, that the failure to make such WPX Adverse Recommendation Change would be inconsistent with its fiduciary duties;

 

   

determines in good faith that the reasons for making such WPX Adverse Recommendation Change are independent of any Acquisition Proposal (whether pending, potential or otherwise) with respect to WPX; and

 

   

provides written notice to Devon (a “WPX Notice of Change”) advising Devon that the WPX Board is contemplating making a WPX Adverse Recommendation Change and specifying the material facts and information constituting the basis for such contemplated determination;



 

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provided, however, that (i) the WPX Board may not make such a WPX Adverse Recommendation Change until the third business day after receipt by Devon of the WPX Notice of Change and (ii) during such three-business-day period, at the request of Devon, WPX will negotiate in good faith with respect to any changes or modifications to the Merger Agreement which would allow the WPX Board not to make such WPX Adverse Recommendation Change consistent with its fiduciary duties.

No Change of Recommendation by Devon (See page 130)

The Merger Agreement provides that neither:

 

   

the Devon Board nor any committee thereof will directly or indirectly:

 

     

withhold or withdraw (or amend, modify or qualify in a manner adverse to WPX), or publicly propose or announce any intention to withhold or withdraw (or amend, modify or qualify in a manner adverse to WPX), the recommendation that the Devon stockholders adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement (the “Devon Recommendation”); or

 

     

recommend, adopt or approve, or propose publicly to recommend, adopt or approve, any Acquisition Proposal with respect to Devon (any action described in this bullet being referred to as a “Devon Adverse Recommendation Change”); nor

 

   

Devon nor any of its subsidiaries will execute or enter into a Devon Acquisition Agreement.

Permitted Change of Recommendation—Superior Proposal

Notwithstanding the provisions of the Merger Agreement described above, at any time prior to obtaining the approval of the Stock Issuance Proposal by Devon’s stockholders, and subject to Devon’s compliance in all material respects at all times with the non-solicitation and stockholder meeting provisions of the Merger Agreement, in response to a superior proposal with respect to Devon that was not initiated, solicited, knowingly encouraged or knowingly facilitated by Devon or any of the subsidiaries of Devon or any of their respective representatives, the Devon Board may make a Devon Adverse Recommendation Change; provided, however, that Devon will not be entitled to exercise its right to make a Devon Adverse Recommendation Change in response to a superior proposal with respect to Devon (i) until three business days after Devon provides written notice to WPX (a “Devon Notice”) advising WPX that the Devon Board or a committee thereof has received a superior proposal, specifying the material terms and conditions of such superior proposal, and identifying the person or group making such superior proposal, (ii) if during such three-business-day period, WPX proposes any alternative transaction (including any modifications to the terms of the Merger Agreement), unless the Devon Board determines in good faith (after consultation with Devon’s financial advisors and outside legal counsel, and taking into account all financial, legal, and regulatory terms and conditions of such alternative transaction proposal, including any conditions to and expected timing of consummation, and any risks of non-consummation of such alternative transaction proposal) that such alternative transaction proposal is not at least as favorable to Devon and its stockholders as the superior proposal (it being understood that any change in the financial or other material terms of a superior proposal will require a new Devon Notice and a new two-business-day period) and (iii) unless the Devon Board, after consultation with outside legal counsel, determines that the failure to make a Devon Adverse Recommendation Change would be inconsistent with its fiduciary duties.

Permitted Change of Recommendation—Intervening Event

Notwithstanding the provisions of the Merger Agreement described above, at any time prior to obtaining the approval of the Stock Issuance Proposal by Devon’s stockholders, and subject to Devon’s compliance in all material respects at all times with the non-solicitation and stockholder meeting provisions of the Merger



 

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Agreement, in response to a Devon Intervening Event (as defined in “The Merger Agreement—No Change of Recommendation—Devon”), the Devon Board may make a Devon Adverse Recommendation Change described in clause (i) of the definition thereof if the Devon Board:

 

   

determines in good faith, after consultation with Devon’s outside legal counsel and any other advisor it chooses to consult, that the failure to make such Devon Adverse Recommendation Change would be inconsistent with its fiduciary duties;

 

   

determines in good faith that the reasons for making such Devon Adverse Recommendation Change are independent of any Acquisition Proposal (whether pending, potential or otherwise) with respect to Devon; and

 

   

provides written notice to WPX (a “Devon Notice of Change”) advising WPX that the Devon Board is contemplating making a Devon Adverse Recommendation Change and specifying the material facts and information constituting the basis for such contemplated determination;

provided, however, that (i) the Devon Board may not make such a Devon Adverse Recommendation Change until the third business day after receipt by WPX of the Devon Notice of Change and (ii) during such three-business-day period, at the request of WPX, Devon will negotiate in good faith with respect to any changes or modifications to the Merger Agreement which would allow the Devon Board not to make such Devon Adverse Recommendation Change consistent with its fiduciary duties.

Termination of the Merger Agreement (See page 143)

Termination by Mutual Consent

The Merger Agreement may be terminated and the merger abandoned at any time prior to the Effective Time, whether before or after adoption of the Merger Agreement by the WPX stockholders or approval of the Stock Issuance Proposal by the Devon stockholders, by mutual written consent of Devon and WPX.

Termination by Either Devon or WPX

Either party may terminate the Merger Agreement if:

 

   

the merger has not been consummated on or prior to March 26, 2021 (the “Termination Date”); provided, however, that the right to terminate the Merger Agreement at the Termination Date will not be available to any party whose action or failure to act is the primary cause of the failure of the merger to occur on or before such date and such action or failure to act constitutes a material breach of the Merger Agreement by such party;

 

   

a court of competent jurisdiction or other governmental entity issues a final and nonappealable order, or takes any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the merger; provided, however, the right to terminate the Merger Agreement in respect of any such order or action is not available to any party whose failure to perform any of its obligations pursuant to Section 5.5 of the Merger Agreement resulted in the entry of the order or the taking of such other action;

 

   

the required approval of the Merger Proposal at the WPX Special Meeting (or at any adjournment thereof) is not obtained; provided, however, that such right to terminate the Merger Agreement is not available to WPX where the failure to obtain the required approval of the WPX stockholders is caused by the action or failure to act of WPX and such action or failure to act constitutes a material breach by WPX of the Merger Agreement; or

 

   

the required approval of the Stock Issuance Proposal at the Devon Special Meeting (or at any adjournment thereof) is not obtained; provided, however, that such right to terminate the Merger



 

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Agreement is not available to Devon where the failure to obtain the required approval of the Devon stockholders is caused by the action or failure to act of Devon and such action or failure to act constitutes a material breach by Devon of the Merger Agreement.

See “The Merger Agreement—Conditions to the Completion of the Merger” for additional details.

Termination by Devon

Devon may terminate the Merger Agreement:

 

   

at any time prior to the Effective Time, if any of WPX’s covenants, representations or warranties contained in the Merger Agreement (other than those set forth in the non-solicitation provisions of the Merger Agreement) are breached or, any of WPX’s representations and warranties become untrue, such that any of the conditions regarding the accuracy of WPX’s representations and warranties or compliance by WPX with its covenants in the Merger Agreement is not satisfied, and such breach (i) is incapable of being cured by WPX or (ii) will not be cured within 30 days of receipt by WPX of written notice of such breach describing in reasonable detail such breach;

 

   

at any time prior to the approval of the Merger Proposal by the stockholders of WPX, if the WPX Board or any committee thereof:

 

     

makes a WPX Adverse Recommendation Change;

 

     

approves or adopts or recommends the approval or adoption of any Acquisition Proposal with respect to WPX or the execution of a definitive agreement with respect to an Acquisition Proposal with respect to WPX (other than any acceptable confidentiality agreement permitted by the Merger Agreement);

 

     

does not include the WPX Recommendation in the joint proxy statement/prospectus; or

 

     

resolves, agrees to, publicly proposes to or allows WPX to publicly propose to take any of the foregoing actions; or

 

   

at any time prior to the receipt of the approval of the Merger Proposal by the stockholders of WPX, if WPX materially breaches the non-solicitation provisions of the Merger Agreement, other than in the case where:

 

     

such material breach is a result of an isolated action by a person that is a representative of WPX;

 

     

WPX uses reasonable best efforts to remedy such material breach; and

 

     

Devon is not significantly harmed as a result thereof.

Termination by WPX

WPX may terminate the Merger Agreement:

 

   

at any time prior to the Effective Time, if any of Devon’s covenants, representations or warranties contained in the Merger Agreement (other than those set forth in the non-solicitation provisions of the Merger Agreement) are breached or, any of Devon’s representations and warranties become untrue, such that any of the conditions regarding the accuracy of Devon’s representations and warranties or compliance by Devon with its covenants in the Merger Agreement (i) is incapable of being cured by Devon or (ii) will not be cured within 30 days of receipt by Devon of written notice of such breach describing in reasonable detail such breach;



 

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at any time prior to approval of the Stock Issuance Proposal by the stockholders of Devon, if the Devon Board or any committee thereof:

 

     

makes a Devon Adverse Recommendation Change;

 

     

approves or adopts or recommends the approval or adoption of any Acquisition Proposal with respect to Devon or the execution of a definitive agreement with respect to an Acquisition Proposal with respect to Devon (other than any acceptable confidentiality agreement permitted by the Merger Agreement);

 

     

does not include the Devon Recommendation in the joint proxy statement/prospectus; or

 

     

resolves, agrees to, publicly proposes to or allows Devon to publicly propose to take any of the foregoing actions; or

 

   

at any time prior to the receipt of the approval of the Stock Issuance Proposal by the stockholders of Devon, if Devon materially breaches the non-solicitation provisions of the Merger Agreement, other than in the case where:

 

     

such material breach is a result of an isolated action by a person that is a representative of Devon;

 

     

Devon uses reasonable best efforts to remedy such material breach; and

 

     

WPX is not significantly harmed as a result thereof.

Payment of Expenses (See page 145)

WPX will be required to pay to Devon the Expenses if the Merger Agreement is terminated by either Devon or WPX because the WPX stockholders do not approve the Merger Proposal. Any such expense reimbursement will be paid no later than three business days after receipt of documentation supporting such expenses.

Devon will be required to pay to WPX the Expenses if the Merger Agreement is terminated by either Devon or WPX because the Devon stockholders do not approve the Stock Issuance Proposal. Any such expense reimbursement will be paid no later than three business days after receipt of documentation supporting such expenses.

For the purposes of the foregoing description, “Expenses” means reasonable and documented out-of-pocket fees and expenses incurred or paid by or on behalf of the party receiving payment thereof and its affiliates in connection with the merger or the other transactions contemplated by the Merger Agreement, or related to the authorization, preparation, negotiation, execution and performance of the Merger Agreement, in each case including all reasonable and documented fees and expenses of law firms, commercial banks, investment banking firms, financing sources, accountants, experts and consultants to such party and its affiliates; provided that the aggregate amount of Expenses reimbursable will not exceed $20,000,000.

Termination Fee (See page 145)

WPX will be required to pay to Devon the Termination Fee if:

 

   

the Merger Agreement is terminated by Devon because WPX (i) makes a WPX Adverse Recommendation Change or (ii) materially breaches the non-solicitation provisions of the Merger Agreement;

 

   

(i) prior to the WPX Special Meeting, an Acquisition Proposal with respect to WPX is publicly proposed or publicly disclosed after the date of the Merger Agreement, (ii) the Merger Agreement is terminated by Devon or WPX because the merger is not consummated by the Termination Date, the



 

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WPX stockholders do not approve the Merger Proposal or a WPX breach of the Merger Agreement and (iii) concurrently with or within nine months after any such termination described in clause (ii), WPX or any of its subsidiaries enters into a definitive agreement with respect to, or otherwise consummates, any Acquisition Proposal with respect to WPX for at least 50% of the business, assets or equity of WPX; or

 

   

the Merger Agreement is terminated by either party because the merger is not consummated by the Termination Date and at the time of such termination, (i) the WPX stockholders have not approved the Merger Proposal and (ii) Devon would have been permitted to terminate the Merger Agreement because of a WPX Adverse Recommendation Change or WPX’s material breach of the non-solicitation provisions in the Merger Agreement.

Devon will be required to pay to WPX the Termination Fee if:

 

   

the Merger Agreement is terminated by WPX because Devon (i) makes a Devon Adverse Recommendation Change or (ii) materially breaches the non-solicitation provisions of the Merger Agreement;

 

   

(i) prior to the Devon Special Meeting, an Acquisition Proposal with respect to Devon is publicly proposed or publicly disclosed after the date of the Merger Agreement, (ii) the Merger Agreement is terminated by Devon or WPX because the merger is not consummated by the Termination Date, the Devon stockholders do not approve the Stock Issuance Proposal or a Devon breach of the Merger Agreement and (iii) concurrently with or within nine months after any such termination described in clause (ii), Devon or any of its subsidiaries enters into a definitive agreement with respect to, or otherwise consummates, any Acquisition Proposal with respect to Devon for at least 50% of the business, assets or equity of Devon; or

 

   

the Merger Agreement is terminated by either party because the merger is not consummated by the Termination Date and at the time of such termination, (i) the Devon stockholders have not approved the Stock Issuance Proposal and (ii) WPX would have been permitted to terminate the Merger Agreement because of a Devon Adverse Recommendation Change or Devon’s material breach of the non-solicitation provisions in the Merger Agreement.

Accounting Treatment (See page 105)

Devon and WPX prepare their respective financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”). The merger will be accounted for using the acquisition method of accounting, with Devon being treated as the accounting acquirer. In identifying Devon as the acquiring entity for accounting purposes, Devon and WPX took into account a number of factors as of the date of this joint proxy statement/prospectus, including which entity is issuing its equity interests, the expectation that following the Effective Time holders of shares of Devon Common Stock as of immediately prior to the Effective Time will hold, in the aggregate, approximately 57% of the issued and outstanding shares of Devon Common Stock (based on fully diluted shares outstanding of Devon) immediately following the Effective Time, the intended corporate governance structure of Devon following the Effective Time, the intended senior management of Devon following the Effective Time and the terms of the share exchange. No single factor was the sole determinant in the overall conclusion that Devon is the acquirer for accounting purposes; rather, all factors were considered in arriving at such conclusion.

Material U.S. Federal Income Tax Consequences of the Merger (See page 105)

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. However, it is not a condition to Devon’s obligation or WPX’s obligation



 

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to complete the merger that the merger qualifies as a “reorganization.” Nevertheless, assuming that the merger so qualifies, U.S. holders (as defined in the section entitled “Material U.S. Federal Income Tax Consequences of the Merger”) of shares of WPX Common Stock will generally not recognize any gain or loss for U.S. federal income tax purposes on the exchange of their shares of WPX Common Stock for shares of Devon Common Stock in the merger, except for any gain or loss that may result from the receipt of cash in lieu of a fractional share of Devon Common Stock.

Devon and WPX have not sought and will not seek any ruling from the IRS regarding any matters relating to the merger and, as a result, there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein.

For a more complete discussion of the U.S. federal income tax consequences of the merger, see the section entitled “Material U.S. Federal Income Tax Consequences of the Merger.”

The discussion of the material U.S. federal income tax consequences contained in this joint proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the merger that may vary with, or are dependent on, individual circumstances. In addition, it does not address the effects of any foreign, state or local tax laws, or federal tax laws other than U.S. federal income tax laws.

THE TAX CONSEQUENCES OF THE MERGER TO ANY PARTICULAR WPX STOCKHOLDER WILL DEPEND ON THAT STOCKHOLDER’S PARTICULAR CIRCUMSTANCES. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES.

Fractional Shares (See page 113)

No fractional shares will be issued in connection with the merger. Instead, a WPX stockholder will receive cash for any fractional share of Devon Common Stock that such stockholder would otherwise receive in the merger.

As promptly as practicable following the Effective Time, the Exchange Agent will (A) determine the number of whole shares of Devon Common Stock and the number of fractional shares of Devon Common Stock that each holder of WPX Common Stock is entitled to receive in connection with the consummation of the merger and (B) aggregate all such fractional shares of Devon Common Stock that would, except under certain circumstances, be issued to the holders of WPX Common Stock, rounding up to the nearest whole number (the “Devon Excess Shares”), and the Exchange Agent will, on behalf of former stockholders of WPX, sell the Devon Excess Shares at then-prevailing prices on the NYSE, all in the manner described below.

The sale of the Devon Excess Shares by the Exchange Agent will be executed on the NYSE through one or more member firms of the NYSE and will be executed in round lots to the extent practicable. The Exchange Agent will use reasonable efforts to complete the sale of the Devon Excess Shares as promptly following the Effective Time as, in the Exchange Agent’s sole judgment, is practicable consistent with obtaining the best execution of such sales in light of prevailing market conditions.

Until the net proceeds of such sale or sales have been distributed to the former holders of WPX Common Stock, the Exchange Agent will hold such proceeds in trust for such holders (the “WPX Common Stock Trust”). Devon will pay all commissions and other out-of-pocket transaction costs (other than any transfer or similar taxes imposed on a holder of WPX Common Stock), including the expenses and compensation of the Exchange Agent incurred in connection with such sale of the Devon Excess Shares.



 

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The Exchange Agent will determine the portion of the WPX Common Stock Trust to which each former holder of WPX Common Stock is entitled, if any, by multiplying the amount of the aggregate net proceeds composing the WPX Common Stock Trust by a fraction, the numerator of which is the amount of the fractional share interest to which such former holder of WPX Common Stock is entitled (after taking into account all shares of WPX Common Stock held at the Effective Time by such holder) and the denominator of which is the aggregate amount of fractional share interests to which all former holders of WPX Common Stock are entitled.

Comparison of Stockholders’ Rights (See page 184)

Upon the completion of the merger, WPX stockholders receiving shares of Devon Common Stock will become stockholders of Devon, and their rights will be governed by Delaware law and the governing corporate documents of Devon in effect at the Effective Time. WPX stockholders will have different rights once they become stockholders of Devon due to differences between the governing corporate documents of WPX and Devon, as further described in “Comparison of Stockholders’ Rights.”

Listing of Devon Common Stock; Delisting and Deregistration of WPX Common Stock (See page 104)

Before completion of the merger, Devon has agreed to use its reasonable best efforts to cause the shares of Devon Common Stock to be issued in the merger and reserved for issuance under any equity awards to be approved for listing on the NYSE. In addition, the new shares of Devon Common Stock to be issued to former WPX stockholders must be approved for listing on the NYSE, subject to official notice of issuance. If the merger is completed, the WPX Common Stock will cease to be listed on the NYSE and will be deregistered under the Exchange Act.

Regulatory Matters (See page 105)

The completion of the merger is subject to antitrust review in the United States. Under the HSR Act and the rules promulgated thereunder, the merger cannot be completed until the parties to the Merger Agreement have given notification and furnished information to the Federal Trade Commission (the “FTC”) and the United States Department of Justice (the “DOJ”) and until the applicable waiting period (and any extension of such period) has expired or has been terminated. On October 22, 2020, Devon and WPX received early termination of the HSR Act waiting period.

No Appraisal Rights (See page 105)

Under the DGCL, neither Devon stockholders nor WPX stockholders are entitled to appraisal rights or dissenters’ rights in connection with the merger or the issuance of shares of Devon Common Stock in the merger.

Litigation Related to the Merger (See Page 105)

Following the filing of the preliminary joint proxy statement/prospectus on November 5, 2020, eleven complaints have been filed with respect to the merger as of November 23, 2020—six in the United States District Court for the Southern District of New York, three in the United States District Court for the District of Delaware, one in the United States District Court for the Eastern District of New York, and one in the Supreme Court of the State of New York for the County of New York. The complaints are captioned as follows: Lowinger v. WPX Energy, Inc., et al., No. 1:20-cv-09519 (S.D.N.Y) (“Lowinger”); John Fiscus v. WPX Energy, Inc., et al., No. 1:20-cv-09614 (S.D.N.Y) (“Fiscus”); Wang v. WPX Energy Inc., et al., No. 1:20-cv-01504-CFC (D. Del.) (“Wang”); Hull v. WPX Energy, Inc., et al., No. 1:20-cv-01517 (D. Del.) (“Hull”); Rigatos v. WPX Energy Inc., No. 1:20-cv-09696 (S.D.N.Y.) (“Rigatos”); Miller v. WPX Energy Inc., et al., No. 1:20-cv-05646 (E.D.N.Y.) (“Miller”); Hogan v. WPX Energy, Inc., et al., No. 1:20-cv-09795 (S.D.N.Y.) (“Hogan”); Westmoreland v. WPX Energy, Inc., et al., No. 1:20-cv-09799 (S.D.N.Y.) (“Westmoreland,”); Bushansky v. WPX Energy, Inc., et al., No. 1:20-cv-09873 (S.D.N.Y.) (“Bushansky”); Allen v. WPX Energy, Inc., et al., No. 656458/2020 (Sup. Ct. N.Y. Cty) (“Allen,” and together with Lowinger, Fiscus, Wang, Hull, Rigatos, Miller, Hogan, Westmoreland, and Bushansky, the “WPX Stockholder Actions”); and Lovoi v. Devon Energy Corp., et al., No. 1:20-cv-01540 (D. Del.) (“Lovoi”). The WPX Stockholder Actions and the Lovoi action are referred to collectively as the “Stockholder Actions.”



 

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The WPX Stockholder Actions were filed by purported WPX stockholders and name WPX and the members of the WPX Board as defendants. The Hull and Allen actions also name Devon and the Merger Sub as defendants. The Lovoi complaint was filed by a purported Devon stockholder and asserts claims against Devon and members of the Devon Board.

The Stockholder Actions generally allege claims of breach of fiduciary duty and/or alleged violations of Section 14(a), Rule 14a-9, and Section (20)a of the Exchange Act premised on a purported failure to disclose material information related to WPX’s and Devon’s financial projections, the sales process, the financial analyses of WPX’s and/or Devon’s financial advisors and, in the case of the WPX Stockholder Actions, the compensation and material relationships of WPX’s financial advisor and WPX’s confidentiality agreements. The Allen complaint is a putative class action that also alleges claims that the WPX directors breached their fiduciary duties and that Devon aided and abetted the alleged breach of fiduciary duty, premised on, among other things, allegations that the merger consideration is inadequate, that the WPX Board process was unfair to stockholders, that WPX’s Board and executive officers are conflicted, and that certain terms of the merger unduly benefit Devon.

The Stockholder Actions seek, among other things, to enjoin a shareholder vote on the merger and/or closing of the merger and to recover attorneys’ fees, and costs. Some of the Stockholder Actions also seek additional relief, including, among other things, damages, recission of the merger or an award of rescissory damages, and/or an order directing the WPX Board to disseminate a revised registration statement in compliance with Sections 14(a) and/or 20(a) of the Exchange Act and Rule 14a-9. The Allen complaint also seeks an order directing the members of the WPX Board to conduct a new sales process to obtain a transaction in the best interest of WPX and its stockholders.

Each of the lawsuits described above is at a preliminary stage and the defendants have not yet answered or otherwise responded to the complaints. Moreover, additional lawsuits related to the merger may be filed. Devon, the Merger Sub, the Devon Board, WPX, and the WPX Board each believes that the respective claims asserted against them in the Stockholder Actions are meritless, but cannot currently reasonably predict the outcome of or reasonably estimate the possible loss or range of loss, if any, from these lawsuits.

Risk Factors (See page 33)

In evaluating the Merger Agreement and the merger, you should carefully read this joint proxy statement/prospectus and give special consideration to the factors discussed in “Risk Factors.”



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF DEVON

The following table presents selected historical consolidated financial data for the periods indicated. Devon derived the selected historical statements of earnings data for the years ended December 31, 2019, 2018 and 2017, and the balance sheet data as of December 31, 2019 and 2018, from its audited consolidated financial statements and related notes thereto included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which is incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data for the nine months ended September 30, 2020 and September 30, 2019, and as of September 30, 2020, are derived from Devon’s unaudited interim consolidated financial statements and related notes thereto contained in Devon’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated by reference into this joint proxy statement/prospectus.

The selected historical consolidated financial data for the years ended December 31, 2016 and 2015, and as of December 31, 2017, 2016 and 2015, have been derived from Devon’s audited consolidated financial statements and related notes thereto for such years, which have not been included or incorporated by reference into this joint proxy statement/prospectus. In 2017, Devon changed its method of accounting for oil and gas exploration and development activities from the full cost method to the successful efforts method. Accordingly, financial information for prior periods, including the selected historical consolidated financial data for 2017, 2016 and 2015 below, has been recast to reflect retrospective application of the successful efforts method. Additionally, Devon sold its Barnett Shale assets in 2020, its Canadian business in 2019 and its aggregate ownership interests in EnLink Midstream Partners, LP and EnLink Midstream, LLC in 2018, all of which qualified as discontinued operations. Therefore, Devon has classified as discontinued operations all financial information related to these divested assets and businesses. The selected historical consolidated financial data as of September 30, 2019 have been derived from Devon’s unaudited interim consolidated financial statements and related notes thereto contained in Devon’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which has not been included or incorporated by reference into this joint proxy statement/prospectus.

In presenting the selected historical consolidated financial data in conformity with GAAP, Devon is required to make estimates and assumptions that affect the amounts reported. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates,” included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, for a detailed discussion of the accounting policies that Devon believes require subjective and complex judgments and estimates included in Devon’s reported financial results. The unaudited financial statements as of and for the periods described above have been prepared on the same basis as the audited consolidated financial statements incorporated by reference in this joint proxy statement/prospectus and include all normal recurring adjustments necessary for a fair statement of the information for the periods presented.

 

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The selected historical consolidated financial data is only a summary and is not necessarily indicative of the results of future operations of Devon nor does it include the effects of the merger discussed in this joint proxy statement/prospectus. This summary should be read together with other information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes of Devon, included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.

 

     As of and for the
Nine Months Ended
September 30,
    As of and for the Years Ended December 31,  
     2020     2019     2019     2018      2017      2016     2015  
     ($ in millions, except per share amounts)  

Statement of Earnings data:

                

Upstream revenues(1)

   $ 2,181     $ 2,436     $ 3,355     $ 4,542      $ 2,988      $ 2,325     $ 4,082  

Total revenues(1)

   $ 3,548     $ 4,631     $ 6,220     $ 8,896      $ 6,501      $ 5,054     $ 7,547  

Net earnings (loss) from continuing operations(2)

   $ (2,470   $ (91   $ (79   $ 714      $ 33      $ (871   $ (7,989

Basic earnings (loss) from continuing operations per share(2)

   $ (6.58   $ (0.22   $ (0.21   $ 1.43      $ 0.06      $ (1.72   $ (19.66

Diluted earnings (loss) from continuing operations per share(2)

   $ (6.58   $ (0.22   $ (0.21   $ 1.42      $ 0.06      $ (1.72   $ (19.66

Cash dividends paid per common share

   $ 0.31     $ 0.26     $ 0.35     $ 0.30      $ 0.24      $ 0.42     $ 0.96  

Balance Sheet data:

                

Total assets(3)

   $ 10,326     $ 14,394     $ 13,717     $ 19,566      $ 30,241      $ 28,675     $ 29,673  

Long-term debt(4)

   $ 4,297     $ 4,295     $ 4,294     $ 4,292      $ 5,258      $ 5,359     $ 7,488  

Stockholders’ equity

   $ 3,148     $ 6,542     $ 5,920     $ 9,186      $ 14,104      $ 12,722     $ 11,111  

Common shares outstanding

     383       387       382       450        525        523       418  

 

(1)

In January 2018, Devon adopted ASC 606—Revenue from Contracts with Customers using the modified retrospective method and applied the standard to all existing contracts at adoption.

(2)

Material asset impairments and acquisition and divestiture activity had significant impacts on operating results and the carrying value of Devon’s oil and gas assets. Specifically, there were asset impairments of $2.8 billion, $0.3 billion, $0.2 billion, $0.5 billion and $10.3 billion in 2020, 2018, 2017, 2016 and 2015, respectively. More discussion on these items can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 and Note 5 of “Item 8. Financial Statements and Supplementary Data” of Devon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in Note 5 of “Item 1. Financial Statements” of Devon’s quarterly report on Form 10-Q for the quarter ended September 30, 2020.

(3)

The decrease from 2018 to 2019 largely relates to the divestiture of Devon’s Canadian business in 2019. The decrease from 2017 to 2018 largely relates to the divestiture of Devon’s aggregate ownership interest in EnLink Midstream Partners, LP and EnLink Midstream, LLC. For additional information, see Note 18 of “Item 8. Financial Statements and Supplementary Data” of Devon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

(4)

Long-term debt reflects obligations related to Devon’s continuing operations.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF WPX

The following table presents selected historical consolidated financial data for the periods indicated below. WPX derived the selected historical statements of operations data for the years ended December 31, 2019, 2018 and 2017 and the balance sheet data as of December 31, 2019 and 2018, from its audited consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which is incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data for the nine months ended September 30, 2020 and September 30, 2019, and as of September 30, 2020, are derived from WPX’s unaudited interim consolidated financial statements and related notes thereto contained in WPX’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, which is incorporated by reference into this joint proxy statement/prospectus. The following information is only a summary and does not provide all of the information contained in WPX’s financial statements.

The selected historical consolidated financial data for the years ended December 31, 2016 and 2015 and as of December 31, 2017, 2016 and 2015, have been derived from WPX’s audited consolidated financial statements as of and for such years, which have not been included or incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data as of September 30, 2019, have been derived from WPX’s unaudited interim consolidated financial statements and related notes thereto contained in WPX’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which has not been incorporated by reference into this joint proxy statement/prospectus.

The unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of WPX’s management, include all adjustments necessary for a fair presentation of the information set forth therein. The results of interim periods are not necessarily indicative of results that may be expected for the full year or any future periods.

The following information should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and WPX’s consolidated financial statements, including the related notes, contained in WPX’s Annual Report on Form 10-K for the year ended December 31, 2019 and WPX’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. See “Where You Can Find More Information.”

 

     Nine Months Ended
September 30,
    Years Ended
December 31,
 
     2020     2019     2019     2018     2017     2016     2015  
     (Millions, except per share amounts)  

Statement of operations data:

 

 

Product revenues

   $ 1,267     $ 1,646     $ 2,247     $ 2,025     $ 1,016     $ 507     $ 403  

Net gain (loss) on derivatives

   $ 484     $ 46     $ (153   $ 81     $ 3     $ (207   $ 418  

Commodity management revenue

   $ 144     $ 155     $ 194     $ 204     $ 25     $ 177     $ 286  

Total revenues

   $ 1,904     $ 1,849     $ 2,292     $ 2,310     $ 1,045     $ 478     $ 1,113  

Income (loss) from continuing operations(1)

   $ (767   $ 379     $ 258     $ 242     $ 24     $ (672   $ 40  

Income (loss) from discontinued operations(2)

   $ (182     (1   $ (2   $ (91   $ (40   $ 71     $ (1,766
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (949   $ 378     $ 256     $ 151     $ (16   $ (601   $ (1,726

Less: Net income attributable to noncontrolling interests

   $ 3       —         —         —         —         —       $ 1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to WPX Energy, Inc.

   $ (952   $ 378     $ 256     $ 151     $ (16   $ (601   $ (1,727

Less: Dividends of preferred stock

     —         —         —       $ 8     $ 15     $ 18     $ 9  

 

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Less: Loss on induced conversion of preferred stock

     —         —         —         —         —       $ 22       —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) available to WPX Energy, Inc. common stockholders

   $ (952   $ 378     $ 256     $ 143     $ (31   $ (641   $ (1,736
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts available to WPX Energy, Inc. common stockholders:

              

Income (loss) from continuing operations

   $ (770   $ 379     $ 258     $ 234     $ 9     $ (712   $ 31  

Income (loss) from discontinued operations

   $ (182     (1   $ (2   $ (91   $ (40   $ 71     $ (1,767

Base earnings (loss) per common share:

              

Income (loss) from continuing operations

   $ (1.46   $ 0.90     $ 0.62     $ 0.57     $ 0.02     $ (2.28   $ 0.13  

Income (loss) from discontinued operations

   $ (0.35     —       $ (0.01   $ (0.22   $ (0.10   $ 0.23     $ (7.55

Diluted earnings (loss) per common share:

              

Income (loss) from continuing operations

   $ (1.46   $ 0.89     $ 0.61     $ 0.57     $ 0.02     $ (2.28   $ 0.13  

Income (loss) from discontinued operations

   $ (0.35     —         —       $ (0.22   $ (0.10   $ 0.23     $ (7.50

Balance sheet data

              

Total assets

   $ 9,501     $ 8,620     $ 8,413     $ 8,203     $ 8,207     $ 7,264     $ 8,393  

Long-term debt

   $ 3,213     $ 2,201     $ 2,202     $ 2,485     $ 2,575     $ 2,575     $ 3,189  

Total stockholders’ equity

   $ 4,536     $ 4,643     $ 4,515     $ 4,301     $ 4,127     $ 3,466     $ 3,535  

 

(1)

Income (loss) from continuing operations includes significant pre-tax items comprised of the following:

 

     Nine Months
Ended

September 30
     Years Ended December 31,  
     2020      2019      2019      2018     2017     2016      2015  
     (Millions)  

Net (gain) loss on sales of assets, divestment of transportation contracts or impairment of producing properties

   $ —        $ —        $ —        $ (3   $ (161   $ 239      $ (349

Gains on equity method investment transactions

   $ —        $ 373      $ 380      $ —       $ —       $ —        $ —    

Impairment of producing properties

   $ 967      $ —        $ —        $ —       $ —       $ —        $ —    

Impairment of unproved leasehold costs

   $ 49      $ —        $ —        $ —       $ —       $ —        $ —    

For further discussion of asset sales and the equity method investment transactions and impairments of producing properties and unproved leasehold costs in 2020, 2019, 2018 and 2017, see Notes 4 and 5 of “Notes to Consolidated Financial Statements” of WPX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Note 5 of “Notes to Consolidated Financial Statements” of WPX’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2020. In 2016, WPX completed the divestment of the remaining transportation contracts that were not included in the Piceance Basin divestment and recorded a net loss of $238 million. In 2015, WPX completed sales of a package of marketing contracts and released certain firm transportation capacity resulting in a $209 million gain. WPX also sold a North Dakota gathering system resulting in a $70 million gain and sold a portion of Appalachian properties resulting in a gain of $69 million.

 

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(2)

Income (loss) from discontinued operations includes the results of holdings in the San Juan Basin, holdings in the Piceance Basin and holdings in the Powder River Basin. Significant components included in income (loss) from discontinued operations are comprised of the following:

 

     Nine Months
Ended

September 30
     Years Ended December 31,  
     2020      2019      2019      2018      2017     2016     2015  
     (Millions)  

Net pre-tax (gain) loss on divestments

   $ —        $ —        $ —        $ 147      $ (10   $ (268   $ (26

San Juan pre-tax impairment

   $ —        $ —        $ —        $ —        $ 60     $ —       $ —    

Piceance pre-tax impairments, including impairment of producing properties, costs of acquired unproved reserves and exploratory area well costs

   $ —        $ —        $ —        $ —        $ —       $ —       $ 2,334  

Powder River pre-tax impairments

   $ —        $ —        $ —        $ —        $ —       $ —       $ 16  

San Juan performance guarantee accrual

   $ 184      $ —        $ —        $ —        $ —       $ —       $ —    

 

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SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma combined balance sheet data gives effect to the proposed merger as if it had occurred on September 30, 2020, while the unaudited pro forma combined statement of operations data for the year ended December 31, 2019 and the nine months ended September 30, 2020 is presented as if the merger had occurred on January 1, 2019. These summary unaudited pro forma combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the merger occurred as of the date indicated. In addition, the unaudited pro forma combined financial statements do not purport to project the future financial position or operating results of the combined company. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 33. The following summary unaudited pro forma combined financial statements should be read in conjunction with the section titled “Unaudited Pro Forma Combined Financial Statements” beginning on page 166 and the related notes.

 

     Nine Months Ended
September 30, 2020
     Year Ended
December 31, 2019
 
     ($ in millions, except per share amounts)  

Pro Forma Combined Statements of Operations Data:

     

Total revenues

   $ 5,618      $ 9,201  

Net earnings (loss) from continuing operations attributable to Devon

   $ (3,517    $ 728  

Basic earnings (loss) from continuing operations per share

   $ (5.27    $ 1.05  

Diluted earnings (loss) from continuing operations per share

   $ (5.27    $ 1.05  

 

     As of
September 30, 2020
 
     ($ in millions)  

Pro Forma Combined Balance Sheet Data:

  

Cash and cash equivalents

   $ 2,217  

Total assets

   $ 17,640  

Long-term debt

   $ 7,780  

Stockholders’ equity

   $ 5,671  

 

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SUMMARY UNAUDITED PRO FORMA COMBINED OIL, NATURAL GAS AND NGL RESERVE INFORMATION AND PRODUCTION DATA

The following tables present the estimated pro forma combined net proved developed and undeveloped oil, natural gas and NGL reserves prepared as of December 31, 2019. The pro forma reserve information set forth below gives effect to the merger as if the merger had been completed on January 1, 2019, and WPX’s acquisition of Felix Energy Holdings II, LLC (“Felix”), which was completed on March 6, 2020, had also been completed on January 1, 2019. However, the proved reserves presented below represent the respective estimates made as of December 31, 2019 by Devon, WPX and Felix while they were separate companies. These estimates have not been updated for changes in development plans or other factors, which have occurred or may occur subsequent to (i) December 31, 2019, (ii) WPX’s acquisition of Felix or (iii) the merger.

The following summary pro forma reserve information has been prepared for illustrative purposes and is not intended to be a projection of future results of the combined company. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section entitled “Risk Factors” beginning on page 33. The summary pro forma reserve information should be read in conjunction with the section titled “Unaudited Pro Forma Combined Financial Statements” beginning on page 166 and the related notes included in this joint proxy statement/prospectus.

 

     Year Ended December 31, 2019  
     Devon
Historical
     WPX
Historical
     Felix
Historical
    Devon Pro
Forma
Combined
 

Proved Developed Reserves:

          

Oil (MMBbls)

     198        184        94       476  

Natural Gas (Bcf)

     1,344        457        107       1,908  

NGL (MMBbls)

     167        66        23       256  

Combined (MMBoe)

     589        326        135       1,050  

Proved Undeveloped Reserves:

          

Oil (MMBbls)

     78        112        248       438  

Natural Gas (Bcf)

     277        284        229       790  

NGL (MMBbls)

     44        43        50       137  

Combined (MMBoe)

     168        202        336 (a)      706  
     Year Ended December 31, 2019  
     Devon
Historical
     WPX
Historical
     Felix
Historical
    Devon Pro
Forma
Combined
 

Production:

          

Oil (MMBbls)

     55        38        12       105  

Natural Gas (Bcf)

     219        78        13       310  

NGL (MMBbls)

     28        10        3       41  

Combined (MMBoe)

     119        61        17       197  
     Nine Months Ended September 30, 2020  
     Devon
Historical
     WPX
Historical
     Felix
Historical
    Devon Pro
Forma
Combined
 

Production:

          

Oil (MMBbls)

     42        34        2       78  

Natural Gas (Bcf)

     167        73        4       244  

NGL (MMBbls)

     21        10        1       32  

Combined (MMBoe)

     91        56        4       151  

 

(a)

The proved undeveloped reserves of Felix were prepared as of December 31, 2019 based on Felix’s development plans and do not necessarily reflect WPX’s development plans after its acquisition of Felix or the combined company’s development plans after the merger.

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE INFORMATION

The following table presents Devon’s and WPX’s historical and pro forma per share data as of and for the year ended December 31, 2019 and as of and for the nine months ended September 30, 2020. The pro forma per share data for the year ended December 31, 2019 and as of and for the nine months ended September 30, 2020 is presented as if the merger and WPX’s acquisition of Felix had been completed on January 1, 2019. Except for the historical information for the year ended December 31, 2019, the information provided in the table below is unaudited. This information should be read together with the historical consolidated financial statements and related notes of Devon and WPX, and incorporated by reference in this joint proxy statement/prospectus, and with the unaudited pro forma combined financial statements included in the section entitled “Unaudited Pro Forma Combined Financial Statements” beginning on page 166.

 

     As of and for the
Year Ended
December 31, 2019
     As of and for the
Nine Months Ended
September 30, 2020
 

Devon Historical

     

Basic net loss from continuing operations per share

   $ (0.21    $ (6.58

Diluted net loss from continuing operations per share

   $ (0.21    $ (6.58

Cash dividends declared per share

   $ 0.35      $ 0.31  

Net book value per share

   $ 15.17      $ 7.90  

WPX Historical

     

Basic net earnings (loss) from continuing operations per share

   $ 0.62      $ (1.46

Diluted net earnings (loss) from continuing operations per share

   $ 0.61      $ (1.46

Cash dividends declared per share

   $ —        $ —    

Net book value per share

   $ 10.83      $ 8.09  

Pro Forma Combined

     

Basic net earnings (loss) from continuing operations per share

   $ 1.05      $ (5.27

Diluted net earnings (loss) from continuing operations per share

   $ 1.05      $ (5.27

Cash dividends declared per share

   $ 0.35      $ 0.31  

Net book value per share

      $ 8.25  

Equivalent WPX(a)

     

Basic net earnings (loss) from continuing operations per share

   $ 0.54      $ (2.72

Diluted net earnings (loss) from continuing operations per share

   $ 0.54      $ (2.72

Cash dividends declared per share

   $ 0.18      $ 0.16  

Net book value per share

      $ 4.26  

 

(a)

Determined using the pro forma combined per share data multiplied by the Exchange Ratio of 0.5165.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

The following table sets forth the closing sale prices per share of Devon Common Stock and WPX Common Stock on the NYSE on September 25, 2020, the last trading day prior to the public announcement of the merger, and on November 18, 2020, the last practicable trading day prior to the mailing of this joint proxy statement/prospectus. Devon Common Stock is traded on the NYSE under the symbol “DVN” and WPX Common Stock is traded on the NYSE under the symbol “WPX.” The high and low trading prices for the Devon Common Stock on September 25, 2020, the last trading day immediately before the public announcement of the merger, were $8.97 and $8.68, respectively. The high and low trading prices for the WPX Common Stock on September 25, 2020, the last trading day immediately before the public announcement of the merger, were $4.46 and $4.22, respectively. The table also shows the estimated implied value of the merger consideration proposed for each share of WPX Common Stock as of the same two dates. The implied value for share consideration was calculated by multiplying the closing sales price of a share of Devon Common Stock on the relevant date by the exchange ratio of 0.5165 shares of Devon Common Stock for each share of WPX Common Stock.

 

     Devon
Common Stock
     WPX Common
Stock
     Implied Per
Share Value of
Share
Consideration
 

September 25, 2020

   $ 8.82      $ 4.44      $ 4.56  

November 18, 2020

   $         12.76      $         6.51      $         6.59  

The market prices of Devon Common Stock and WPX Common Stock have fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate prior to the completion of the merger. No assurance can be given concerning the market prices of Devon Common Stock or WPX Common Stock before completion of the merger or of Devon Common Stock after completion of the merger. Because the Exchange Ratio, which determines the merger consideration, is fixed and will not be adjusted for changes in the market prices of either Devon Common Stock or WPX Common Stock, the market price of Devon Common Stock (and, therefore, the value of the merger consideration) when received by WPX stockholders after the merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, these comparisons may not provide meaningful information to stockholders in determining how to vote with respect to the proposals described in this joint proxy statement/prospectus. We urge you to obtain current market quotations for Devon Common Stock and WPX Common Stock and to review carefully the other information contained in this joint proxy statement/prospectus. Please see “Risk Factors—Risks Relating to the Merger—Because the market price of Devon Common Stock will fluctuate, WPX stockholders cannot be sure of the value of the shares of Devon Common Stock they will receive in the merger. In addition, because the Exchange Ratio is fixed, the number of shares of Devon Common Stock to be received by WPX stockholders in the merger will not change between now and the time the merger is completed to reflect changes in the trading prices of Devon Common Stock or WPX Common Stock.”

For more information on the market for Devon’s or WPX’s common equity, related stockholder matters and issuer purchases of equity securities, see Part II, Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” of Devon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, or WPX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which are each incorporated by reference into this joint proxy statement/prospectus.

 

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Dividend Information

The table below summarizes the dividends Devon paid on the Devon Common Stock:

 

     Amounts      Rate Per Share  
     ($ in millions, except
per share amounts)
 

Year Ended 2020:

     

First quarter

   $ 34      $ 0.09  

Second quarter

     42      $ 0.11  

Third quarter

     43      $ 0.11  
  

 

 

    

Total year-to-date

   $ 119     
  

 

 

    

Year Ended 2019:

     

First quarter

   $ 34      $ 0.08  

Second quarter

     37      $ 0.09  

Third quarter

     35      $ 0.09  

Fourth quarter

     34      $ 0.09  
  

 

 

    

Total year-to-date

   $ 140     
  

 

 

    

Year Ended 2018:

     

First quarter

   $ 32      $ 0.06  

Second quarter

     42      $ 0.08  

Third quarter

     38      $ 0.08  

Fourth quarter

     37      $ 0.08  
  

 

 

    

Total year-to-date

   $ 149     
  

 

 

    

Year Ended 2017:

     

First quarter

   $ 32      $ 0.06  

Second quarter

     33      $ 0.06  

Third quarter

     30      $ 0.06  

Fourth quarter

     32      $ 0.06  
  

 

 

    

Total year-to-date

   $ 127     
  

 

 

    

Devon raised its quarterly dividend by 22%, to $0.11 per share, beginning in the second quarter of 2020. In the second quarter of 2019, Devon increased the quarterly dividend rate from $0.08 to $0.09 per share.

On August 4, 2020, the Devon Board approved a $0.26 per share (approximately $100 million total) special dividend that was paid on October 1, 2020, to holders of record as of August 14, 2020. The terms of the Merger Agreement limit the ability of Devon to declare or pay additional dividends, other than its regular quarterly dividend not to exceed $0.11 per share, prior to the completion of the merger.

WPX has not paid any cash dividends since its inception. The terms of the Merger Agreement limit the ability of WPX to declare or pay dividends prior to the completion of the merger. In addition, certain of WPX’s debt instruments place restrictions on its ability to pay cash dividends.

 

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RISK FACTORS

In deciding how to vote, stockholders of Devon and WPX, respectively, should carefully consider the following risk factors and all of the information contained in or incorporated by reference herein, including, but not limited to, the matters addressed in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” as well as WPX’s and Devon’s other filings with the SEC incorporated herein by reference. Please see the section entitled “Where You Can Find More Information.”

Risks Relating to the Merger

Because the market price of Devon Common Stock will fluctuate, WPX stockholders cannot be sure of the value of the shares of Devon Common Stock they will receive in the merger. In addition, because the Exchange Ratio is fixed, the number of shares of Devon Common Stock to be received by WPX stockholders in the merger will not change between now and the time the merger is completed to reflect changes in the trading prices of Devon Common Stock or WPX Common Stock.

As a result of the merger, each eligible share of WPX Common Stock will be converted automatically into the right to receive 0.5165 shares of Devon Common Stock, with cash paid in lieu of the issuance of any fractional shares of Devon Common Stock. The Exchange Ratio is fixed, which means that it will not change between now and the closing date, regardless of whether the market price of either Devon Common Stock or WPX Common Stock changes. Therefore, the value of the merger consideration will depend on the market price of Devon Common Stock at the Effective Time. The market price of Devon Common Stock has fluctuated since the date of the announcement of the parties’ entry into the Merger Agreement and will continue to fluctuate from the date of this joint proxy statement/prospectus to the date of the WPX Special Meeting, the date of the Devon Special Meeting, the date the merger is completed and thereafter. The market price of Devon Common Stock, when received by WPX stockholders after the merger is completed, could be greater than, less than or the same as the market price of Devon Common Stock on the date of this joint proxy statement/prospectus or at the time of the WPX Special Meeting. Accordingly, you should obtain current stock price quotations for Devon Common Stock and WPX Common Stock before deciding how to vote or abstain from voting on any of the proposals described in this joint proxy statement/prospectus.

The market price for Devon Common Stock following the closing may be affected by factors different from those that historically have affected or currently affect Devon Common Stock and WPX Common Stock.

Upon the completion of the merger, WPX stockholders will receive shares of Devon Common Stock. Devon’s financial position may differ from its financial position before the completion of the merger, and the results of operations of the combined company may be affected by some factors that are different from those currently affecting the results of operations of Devon and those currently affecting the results of operations of WPX. Accordingly, the market price and performance of Devon Common Stock is likely to be different from the performance of WPX Common Stock in the absence of the merger. In addition, general fluctuations in stock markets could have a material adverse effect on the market for, or liquidity of, Devon Common Stock, regardless of Devon’s actual operating performance. For a discussion of the businesses of Devon and WPX and important factors to consider in connection with those businesses, see the documents incorporated by reference herein and referred to in “Where You Can Find More Information.”

Devon stockholders and WPX stockholders, in each case as of immediately prior to the merger, will have reduced ownership in the combined company.

Based on the number of issued and outstanding shares of WPX Common Stock as of November 18, 2020, and the number of outstanding WPX equity awards currently estimated to be payable in shares of Devon Common Stock in connection with the merger, Devon anticipates issuing up to approximately 296,206,560 shares of Devon Common Stock pursuant to the Merger Agreement. The actual number of shares of Devon Common Stock to be issued pursuant to the Merger Agreement will be determined at the completion of the merger based on the

 

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number of shares of WPX Common Stock outstanding immediately prior to such time. The issuance of these new shares could have the effect of depressing the market price of Devon Common Stock, through dilution of earnings per share or otherwise. Any dilution of, or delay of any accretion to, Devon’s earnings per share could cause the price of Devon Common Stock to decline or increase at a reduced rate.

Immediately after the completion of the merger, it is expected that Devon stockholders as of immediately prior to the merger will own approximately 57%, and WPX stockholders as of immediately prior to the merger will own approximately 43%, of the issued and outstanding shares of Devon Common Stock (in each case based on fully diluted shares outstanding of each company). As a result, Devon’s current stockholders and WPX’s current stockholders will have less influence on the policies of the combined company than they currently have on the policies of Devon and WPX, respectively.

Devon and WPX must obtain certain regulatory approvals and clearances to consummate the merger, which, if delayed, not granted or granted with unacceptable conditions, could prevent, substantially delay or impair consummation of the merger, result in additional expenditures of money and resources or reduce the anticipated benefits of the merger.

At any time before or after consummation of the merger, the DOJ or the FTC, or any state, could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the merger, seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights. Such action could include seeking to enjoin the completion of the merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances.

The merger is subject to a number of conditions to the obligations of both Devon and WPX to complete the merger, which, if not fulfilled, or not fulfilled in a timely manner, may delay completion of the merger or result in termination of the Merger Agreement.

The respective obligations of each of WPX and Devon to effect the merger are subject to the satisfaction at or prior to the Effective Time of numerous conditions, including the following:

 

   

the approval of the Merger Proposal by the WPX stockholders;

 

   

the approval of the Stock Issuance Proposal by the Devon stockholders;

 

   

the shares of Devon Common Stock that will be issued in the merger must have been authorized for listing on the NYSE, upon official notice of issuance;

 

   

the registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, will have become effective under the Securities Act and no stop order suspending its effectiveness may be in effect;

 

   

the absence of any applicable law or order (preliminary or otherwise) prohibiting the consummation of the merger; and

 

   

the expiration or earlier termination of the waiting period (and any extension of such period) under the HSR Act.

Many of the conditions to completion of the merger are not within either Devon’s or WPX’s control, and neither company can predict when, or if, these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to March 26, 2021, it is possible that the Merger Agreement may be terminated. Although Devon and WPX have agreed in the Merger Agreement to use reasonable best efforts to, subject to certain limitations, to complete the merger as promptly as practicable, these and other conditions to the completion of the merger may fail to be satisfied. In addition, satisfying the conditions to and completion of the merger may take longer, and could cost more, than Devon and WPX expect. Neither Devon nor WPX can predict

 

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whether and when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the merger for a significant period of time or prevent them from occurring. Any delay in completing the merger may adversely affect the cost savings and other benefits that Devon and WPX expect to achieve if the merger and the integration of the companies’ respective businesses are not completed within the expected timeframe. There can be no assurance that all required regulatory approvals will be obtained or obtained prior to the termination date.

Uncertainties associated with the merger may cause a loss of management personnel and other key employees of Devon and WPX, which could adversely affect the future business and operations of Devon following the merger.

Devon and WPX are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Devon’s success after the merger will depend in part upon its ability to retain key management personnel and other key employees. Current and prospective employees of Devon and WPX may experience uncertainty about their roles within Devon following the merger or other concerns regarding the timing and completion of the merger or the operations of Devon following the merger, any of which may have an adverse effect on the ability of Devon and WPX to retain or attract key management and other key personnel. If Devon or WPX is unable to retain personnel, including Devon’s or WPX’s key management, who are critical to the future operations of the companies, Devon and WPX could face disruptions in their operations, loss of existing customers, loss of key information, expertise or know-how and unanticipated additional recruitment and training costs. In addition, the loss of key Devon and WPX personnel could diminish the anticipated benefits of the merger. No assurance can be given that Devon, following the merger, will be able to retain or attract key management personnel and other key employees of Devon and WPX to the same extent that Devon and WPX have previously been able to retain or attract their own employees.

The business relationships of Devon and WPX may be subject to disruption due to uncertainty associated with the merger, which could have a material adverse effect on the results of operations, cash flows and financial position of Devon or WPX pending and following the merger.

Parties with which Devon or WPX do business may experience uncertainty associated with the merger, including with respect to current or future business relationships with Devon or WPX following the merger. Devon’s and WPX’s business relationships may be subject to disruption as customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners may attempt to delay or defer entering into new business relationships, negotiate changes in existing business relationships or consider entering into business relationships with parties other than Devon or WPX following the merger. These disruptions could have a material and adverse effect on the results of operations, cash flows and financial position of Devon or WPX, regardless of whether the merger is completed, as well as a material and adverse effect on Devon’s ability to realize the expected cost savings and other benefits of the merger. The risk, and adverse effect, of any disruption could be exacerbated by a delay in completion of the merger or termination of the Merger Agreement.

Devon or WPX may waive one or more of the closing conditions without re-soliciting stockholder approval.

Devon or WPX may determine to waive, in whole or part, one or more of the conditions to closing the merger prior to Devon or WPX, as the case may be, being obligated to consummate the merger. Each of Devon and WPX currently expects to evaluate the materiality of any waiver and its effect on its respective stockholders in light of the facts and circumstances at the time, to determine whether any amendment of this joint proxy statement/prospectus or any re-solicitation of proxies is required in light of such waiver. Any determination whether to waive any condition to the merger or to re-solicit stockholder approval or amending or supplementing this joint proxy statement/prospectus as a result of a waiver will be made by Devon or WPX at the time of such waiver based on the facts and circumstances as they exist at that time.

 

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WPX stockholders will not be entitled to appraisal rights in the merger.

Under Delaware law, holders of WPX Common Stock do not have appraisal rights in connection with the merger, as more fully described in “The Merger—No Appraisal Rights.”

The Merger Agreement subjects Devon and WPX to restrictions on their respective business activities prior to the Effective Time.

The Merger Agreement subjects Devon and WPX to restrictions on their respective business activities prior to the Effective Time. The Merger Agreement obligates each of Devon and WPX to generally conduct its businesses in the ordinary course until the Effective Time and to use its commercially reasonable efforts to (i) preserve intact its present business organization, (ii) maintain its assets and properties and (iii) preserve its existing relationships and goodwill with governmental entities, key employees, customers, suppliers, licensors, licensees, distributors, lessors and others having business dealings with it. These restrictions could prevent Devon and WPX from pursuing certain business opportunities that arise prior to the Effective Time. See “The Merger Agreement—Covenants” for additional details.

Directors and executive officers of each party have interests in the merger that may be different from, or in addition to, the interests of the Devon and WPX stockholders generally.

In considering the recommendation of the (i) Devon Board that Devon stockholders vote in favor of the Stock Issuance Proposal and (ii) WPX Board that WPX stockholders vote in favor of the Merger Proposal and the Advisory Compensation Proposal, Devon and WPX stockholders should be aware of and take into account the fact that certain Devon and WPX directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of Devon and WPX stockholders generally. The interests of Devon’s directors and executive officers include, among others, severance rights and distributions for their nonqualified deferred compensation plan benefits. See “The Merger—Interests of Devon’s Directors and Executive Officers in the Merger” for a more detailed description of these interests. The interests of WPX’s directors and executive officers include, among others, severance rights, rights to continuing indemnification and directors’ and officers’ liability insurance. See “The Merger—Interests of WPX’s Directors and Executive Officers in the Merger” for a more detailed description of these interests. The Devon Board and WPX Board were aware of and carefully considered the interests of their respective directors and officers , among other matters, in evaluating the terms and structure, and overseeing the negotiation of the merger, in approving the Merger Agreement and the transactions contemplated thereby, including the merger, and the recommendation of the (i) Devon Board that Devon stockholders vote in favor of the Stock Issuance Proposal and (ii) WPX Board that WPX stockholders adopt the Merger Agreement.

The Merger Agreement limits Devon’s and WPX’s respective ability to pursue alternatives to the merger, may discourage certain other companies from making a favorable alternative transaction proposal and, in specified circumstances, could require Devon or WPX to pay the other party a termination fee.

The Merger Agreement contains certain provisions that restrict each of Devon’s and WPX’s ability to initiate, solicit, knowingly encourage or knowingly facilitate any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to result in, a competing proposal with respect to Devon or WPX, as applicable, and Devon and WPX have each agreed to certain terms and conditions relating to their ability to engage in, continue or otherwise participate in any discussions with respect to, provide any third party confidential information with respect to or enter into any an acquisition agreement with respect to certain unsolicited proposals that constitute or are reasonably likely to lead to a competing proposal. Further, even if the Devon Board or the WPX Board changes, withdraws, modifies, or qualifies its recommendation with respect to the Stock Issuance Proposal or the Merger Proposal, as applicable, unless the Merger Agreement has been terminated in accordance with its terms, both parties will still be required to submit the Stock Issuance Proposal and the Merger Proposal, as applicable, to a vote at their respective special meetings. In addition, Devon and

 

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WPX generally have an opportunity to offer to modify the terms of the Merger Agreement in response to any competing Acquisition Proposals or intervening events before the WPX Board or Devon Board, respectively, may withdraw or qualify their respective recommendations. The Merger Agreement further provides that under specified circumstances, including after receipt of certain alternative Acquisition Proposals, each of Devon and WPX may be required to pay the other a cash termination fee equal to $75,000,000. See “The Merger Agreement—Termination Fee” for additional details.

These provisions could discourage a potential third party acquirer or other strategic transaction partner that might have an interest in acquiring all or a significant portion of WPX or Devon from considering or pursuing an alternative transaction with either party or proposing such a transaction, even if it were prepared, in WPX’s case, to pay consideration with a higher per share value than the total value proposed to be paid or received in the merger. These provisions might also result in a potential third party acquirer or other strategic transaction partner proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee or expense reimbursement that may become payable in certain circumstances.

Failure to complete the merger could negatively impact Devon’s or WPX’s stock price and have a material adverse effect on their results of operations, cash flows and financial position.

If the merger is not completed for any reason, including as a result of failure to obtain all requisite regulatory approvals or if the Devon stockholders or WPX stockholders fail to approve the applicable proposals, the ongoing businesses of Devon and WPX may be materially adversely affected and, without realizing any of the benefits of having completed the merger, Devon and WPX would be subject to a number of risks, including the following:

 

   

Devon and WPX may experience negative reactions from the financial markets, including negative impacts on their respective stock prices;

 

   

Devon, WPX and their respective subsidiaries may experience negative reactions from their respective customers, distributors, suppliers, vendors, landlords, joint venture partners and other business partners;

 

   

Devon and WPX will still be required to pay certain significant costs relating to the merger, such as legal, accounting, financial advisor and printing fees;

 

   

Devon or WPX may be required to pay a termination fee as required by the Merger Agreement;

 

   

the Merger Agreement places certain restrictions on the conduct of the respective businesses pursuant to the terms of the Merger Agreement, which may delay or prevent the respective companies from undertaking business opportunities that, absent the Merger Agreement, may have been pursued;

 

   

matters relating to the merger (including integration planning) require substantial commitments of time and resources by each company’s management, which may have resulted in the distraction of each company’s management from ongoing business operations and pursuing other opportunities that could have been beneficial to the companies; and

 

   

litigation related to any failure to complete the merger or related to any enforcement proceeding commenced against Devon or WPX to perform their respective obligations pursuant to the Merger Agreement.

If the merger is not completed, the risks described above may materialize and they may have a material adverse effect on Devon’s or WPX’s results of operations, cash flows, financial position and stock prices.

 

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The shares of Devon Common Stock to be received by WPX stockholders upon the completion of the merger will have different rights from shares of WPX Common Stock.

Upon the completion of the merger, WPX stockholders will no longer be stockholders of WPX. Instead, former WPX stockholders will become Devon stockholders and while their rights as Devon stockholders will continue to be governed by the laws of the state of Delaware, their rights will be subject to and governed by the terms of the Devon restated certificate of incorporation and the Devon amended and restated bylaws. The terms of the Devon restated certificate of incorporation and the Devon amended and restated bylaws are in some respects different than the terms of the WPX amended and restated certificate of incorporation and the WPX amended and restated bylaws, which currently govern the rights of WPX stockholders. See “Comparison of Stockholders’ Rights” for a discussion of the different rights associated with shares of Devon Common Stock and shares of WPX Common Stock.

Completion of the merger may trigger change in control or other provisions in certain agreements to which WPX is a party.

The completion of the merger may trigger change in control or other provisions in certain agreements to which WPX is a party. If Devon and WPX are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements, or seeking monetary damages. Even if Devon and WPX are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to WPX.

Devon and WPX are expected to incur significant transaction costs in connection with the merger, which may be in excess of those anticipated by them.

Devon and WPX have incurred and are expected to continue to incur a number of non-recurring costs associated with negotiating and completing the merger, combining the operations of the two companies and achieving desired synergies. These costs have been, and will continue to be, substantial and, in many cases, will be borne by Devon and WPX whether or not the merger is completed. A substantial majority of non-recurring expenses will consist of transaction costs and include, among others, fees paid to financial, legal, accounting and other advisors, employee retention, severance and benefit costs and filing fees. Devon will also incur costs related to formulating and implementing integration plans, including facilities and systems consolidation costs and other employment-related costs. Devon and WPX will continue to assess the magnitude of these costs and additional unanticipated costs may be incurred in connection with the merger and the integration of the two companies’ businesses. While Devon and WPX have assumed that a certain level of expenses would be incurred, there are many factors beyond their control that could affect the total amount or the timing of the expenses. The elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may not offset integration-related costs and achieve a net benefit in the near term, or at all. The costs described above and any unanticipated costs and expenses, many of which will be borne by Devon or WPX even if the merger is not completed, could have an adverse effect on Devon’s or WPX’s financial condition and operating results.

Litigation relating to the merger could result in an injunction preventing the completion of the merger and/or substantial costs to Devon and WPX.

Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into acquisition, merger, or other business combination agreements. Even if such a lawsuit is without merit, defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result in monetary damages, which could have a negative impact on Devon’s and WPX’s respective liquidity and financial condition.

Lawsuits brought against Devon, WPX or their respective directors could also seek, among other things, injunctive relief or other equitable relief, including a request to rescind parts of the Merger Agreement already

 

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implemented and to otherwise enjoin the parties from consummating the merger. One of the conditions to the closing of the merger is that no injunction by any any court, administrative agency or other governmental entity has been entered and continues to be in effect and no law has been adopted or is effective. Consequently, if a plaintiff is successful in obtaining an injunction prohibiting completion of the merger, that injunction may delay or prevent the merger from being completed within the expected timeframe or at all, which may adversely affect Devon’s and WPX’s respective business, financial position and results of operation.

There can be no assurance that any of the defendants will be successful in the outcome of any pending or any potential future lawsuits. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect Devon’s or WPX’s business, financial condition, results of operations and cash flows.

Risks Relating to Devon and WPX

Recent declines in crude oil prices to record low levels as a result of the outbreak of the novel strain of coronavirus (“COVID-19”) and a significantly oversupplied crude oil market have negatively impacted demand for the products of Devon and WPX and are expected to continue to negatively impact demand for the products of Devon, WPX and of the combined company, which may result in a material negative impact on the combined company’s results of operations, financial position and liquidity.

The COVID-19 outbreak in the United States and globally, together with the recent significant decline in commodity prices due, in significant part, to the actions of the Organization of the Petroleum Exporting Countries and other oil producing nations (“OPEC+”), have adversely affected and are expected to continue to adversely affect, both the price of and demand for crude oil and the continuity of the combined company’s business operations. Oil demand significantly deteriorated as a result of the COVID-19 pandemic and corresponding preventative measures taken around the world to mitigate its spread, including “shelter-in-place” orders, quarantines, executive orders and similar governmental orders and restrictions for their citizens to control the spread of COVID-19.

In March 2020, OPEC+ were unable to reach an agreement on production levels for crude oil, at which point Saudi Arabia and Russia initiated efforts to aggressively increase crude oil production. The convergence of the COVID-19 pandemic and the crude oil production increases caused the significant dual impact of global crude oil demand decline and the risk of a substantial increase in supply. While OPEC+ agreed in April 2020 to cut production, downward pressure on commodity prices has remained and could continue for the foreseeable future.

This decline in commodity prices has already adversely impacted the results of operations for Devon and WPX during 2020 and contributed to both companies recognizing material asset impairments to their oil and gas assets earlier in 2020. Any sustained weakness or further deterioration in commodity prices could further adversely impact the results of operations, the value of properties and the financial condition of Devon, WPX and the combined company.

The negative effects of COVID-19 on economic prospects across the world have contributed to concerns for the potential of a prolonged economic slowdown and recession. Any such downturn, or a protracted period of depressed commodity prices, could have significant adverse consequences for financial condition and liquidity of Devon, WPX and the combined company, by, among other things: (i) limiting their ability to access sources of capital due to disruptions in financial markets or otherwise; and (ii) increasing the risk of a downgrade from credit rating agencies, which could trigger new credit support obligations and further adversely affect their ability to access financing or trade credit. Moreover, any such downturn could also result in similar financial constraints for the companies’ non-operating partners, purchasers of the companies’ production and other counterparties, thereby increasing the risk that such counterparties default on their obligations. Such defaults or more general supply chain disruptions due to the pandemic may also jeopardize the supply of materials, equipment or services for the companies’ operations.

 

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The COVID-19 pandemic and related restrictions aimed at mitigating its spread have caused Devon and WPX to modify certain business practices, including limiting employee travel, encouraging work-from-home practices and other social distancing measures. Such measures may cause disruptions to Devon’s, WPX’s and the combined company’s business and operational plans, which may include shortages of employees, contractors and subcontractors. There is no certainty that these or any other future measures will be sufficient to mitigate the risks posed by the disease, including the risk of infection of key employees, and the companies’ ability to perform certain functions could be impaired by these new business practices. For example, reliance on technology has necessarily increased due to the encouragement of remote communications and other work-from-home practices, which could make Devon, WPX and the combined company more vulnerable to cyber-attacks.

The COVID-19 pandemic and its related effects continue to rapidly evolve. The ultimate extent of the impact of the COVID-19 pandemic and any other future pandemic on the combined company’s business will depend on future developments, including, but not limited to, the nature, duration and spread of the disease, the responsive actions to contain its spread or address its effects and the duration, timing and severity of the related consequences on commodity prices and the economy more generally, including any recession resulting from the pandemic. Any extended period of depressed commodity prices or general economic disruption as a result of the pandemic would adversely affect the combined company’s business, financial condition and results of operations.

The combined company may not be able to retain customers or suppliers, and customers or suppliers may seek to modify contractual obligations with the combined company, either of which could have an adverse effect on the combined company’s business and operations. Third parties may terminate or alter existing contracts or relationships with Devon or WPX as a result of the merger.

As a result of the merger, the combined company may experience impacts on relationships with customers and suppliers that may harm the combined company’s business and results of operations. Certain customers or suppliers may seek to terminate or modify contractual obligations following the merger whether or not contractual rights are triggered as a result of the merger. There can be no guarantee that customers and suppliers will remain with or continue to have a relationship with the combined company or do so on the same or similar contractual terms following the merger. If any customers or suppliers seek to terminate or modify contractual obligations or discontinue their relationships with the combined company, then the combined company’s business and results of operations may be harmed. Furthermore, the combined company will not have long-term arrangements with many of its significant suppliers. If the combined company’s suppliers were to seek to terminate or modify an arrangement with the combined company, then the combined company may be unable to procure necessary supplies or services from other suppliers in a timely and efficient manner and on acceptable terms, or at all.

Devon and WPX also have contracts with vendors, landlords, licensors and other business partners which may require Devon or WPX, as applicable, to obtain consent from these other parties in connection with the merger. If these consents cannot be obtained, the combined company may suffer a loss of potential future revenue, incur costs and lose rights that may be material to the business of the combined company. In addition, third parties with whom Devon or WPX currently have relationships may terminate or otherwise reduce the scope of their relationship with either party in anticipation of the merger. Any such disruptions could limit the combined company’s ability to achieve the anticipated benefits of the merger. The adverse effect of any such disruptions could also be exacerbated by a delay in the completion of the merger or by a termination of the Merger Agreement.

The combined company may fail to realize the anticipated benefits of the merger.

The success of the merger will depend on, among other things, the combined company’s ability to combine the Devon and WPX businesses in a manner that realizes anticipated synergies and benefits and meets or exceeds the forecasted stand-alone cost savings anticipated by the combined company. The combined company

 

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anticipates it will benefit from significant synergies, based on, among other things, increased scale. If the combined company is not able to successfully achieve these synergies, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

The failure to successfully integrate the businesses and operations of Devon and WPX in the expected time frame may adversely affect the combined company’s future results.

Devon and WPX have operated and, until the completion of the merger, will continue to operate independently; however, their respective businesses may not be integrated successfully. It is possible that the integration process could result in the loss of key Devon employees or key WPX employees, the loss of customers, providers, vendors or business partners, the disruption of either company’s or both companies’ ongoing businesses, inconsistencies in standards, controls, procedures and policies, potential unknown liabilities and unforeseen expenses, delays, or regulatory conditions associated with and following completion of the merger or higher than expected integration costs and an overall post-completion integration process that takes longer than originally anticipated. Specifically, the following issues, among others, must be addressed in integrating the operations of Devon and WPX in order to realize the anticipated benefits of the merger:

 

   

combining the companies’ operations and corporate functions and the resulting difficulties associated with managing a larger, more complex, integrated business;

 

   

combining the businesses of Devon and WPX in a manner that permits the combined company to achieve any cost savings or operating synergies anticipated to result from the merger;

 

   

reducing additional and unforeseen expenses such that integration costs are not more than anticipated;

 

   

avoiding delays in connection with the merger or the integration process;

 

   

integrating personnel from the two companies and minimizing the loss of key employees;

 

   

identifying and eliminating redundant functions and assets;

 

   

harmonizing the companies’ operating practices, employee development and compensation programs, internal controls and other policies, procedures and processes;

 

   

maintaining existing agreements with customers, providers and vendors or business partners and avoiding delays in entering into new agreements with prospective customers, providers and vendors or business partners;

 

   

addressing possible differences in business backgrounds, corporate cultures and management philosophies;

 

   

consolidating the companies’ operating, administrative and information technology infrastructure and financial systems;

 

   

coordinating distribution and marketing efforts; and

 

   

establishing the combined company’s headquarters in Oklahoma City, Oklahoma.

In addition, at times the attention of certain members of either company’s or both companies’ management and resources may be focused on completion of the merger and the integration of the businesses of the two companies and diverted from day-to-day business operations or other opportunities that may have been beneficial to such company, which may disrupt each company’s ongoing business and the business of the combined company.

Furthermore, the Devon Board and executive leadership of Devon will consist of former directors from each of Devon and WPX and former executive officers from each of Devon and WPX, respectively. Combining the boards of directors and management teams of each company into a single board and a single management team could require the reconciliation of differing priorities and philosophies.

 

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The unaudited pro forma combined financial information contained in this joint proxy statement/prospectus may not be an indication of the combined company’s results of operations or financial condition following the closing of the merger.

This joint proxy statement/prospectus includes unaudited pro forma combined financial information for the combined company, which give effect to the merger and should be read in conjunction with the financial statements and accompanying notes of Devon and WPX, which are incorporated by reference into this joint proxy statement/prospectus. The unaudited pro forma combined financial information contained in this joint proxy statement/prospectus should not be considered to be an indication of the combined company’s results of operations or financial condition following the closing of the merger. The unaudited pro forma combined financial information has been derived from the historical financial statements of Devon and WPX and adjustments, assumptions and preliminary estimates have been made in connection with the preparation of this information. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments, assumptions and estimates are difficult to make with accuracy.

Moreover, the unaudited pro forma combined financial information does not reflect all costs that are expected to be incurred by the combined company in connection with the merger. For example, the impact of any incremental costs incurred in coordinating the operations of Devon and WPX are not reflected in the unaudited pro forma combined financial information. In addition, the unaudited pro forma combined financial information does not include, among other things, estimated cost synergies, adjustments related to restructuring or integration activities, future acquisitions or disposals not yet known or probable, or impacts of merger-related change in control provisions that are currently not factually supportable or probable of occurring.

As a result, the actual results of operations and financial condition of the combined company following the closing of the merger may not be consistent with, or evident from, the unaudited pro forma combined financial information. The assumptions used in preparing the unaudited pro forma combined financial information may not prove to be accurate, and other factors may affect the combined company’s results of operations or financial condition following the closing of the merger. Any potential decline in the combined company’s financial condition or results of operations may cause significant variations in the price of the Devon Common Stock following the closing of the merger.

The unaudited pro forma combined financial information in this joint proxy statement/prospectus is based on the best information available, which in part includes a number of estimates and assumptions. These estimates and assumptions may prove not to be accurate, and accordingly, the unaudited pro forma combined financial information should not be assumed to be indicative of what the combined company’s financial condition, results of operations or cash flows actually would have been as a stand-alone company or to be a reliable indicator of what the combined company’s financial condition or results of operations may actually be in the future.

The shares of Devon Common Stock to be received by WPX stockholders as a result of the merger will have different rights from shares of WPX Common Stock.

Following completion of the merger, WPX stockholders will no longer be stockholders of WPX but will instead be stockholders of Devon. There are differences between the current rights of WPX stockholders and the rights of Devon stockholders that may be important to WPX stockholders. See “Comparison of Stockholders’ Rights” for a discussion of the different rights associated with WPX Common Stock and Devon Common Stock.

The financial forecasts relating to Devon and WPX prepared in connection with the merger may not be realized, which may adversely affect the market price of the Devon Common Stock following the closing of the merger.

This joint proxy statement/prospectus includes certain financial forecasts considered by Devon and WPX in connection with their respective businesses. None of the financial forecasts prepared by Devon or WPX were

 

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prepared with a view towards public disclosure or compliance with the published guidelines of the SEC, GAAP or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts. These forecasts are inherently based on various estimates and assumptions that are subject to the judgment of those preparing them. These forecasts are also subject to significant economic, competitive, industry and other uncertainties and contingencies, all of which are difficult or impossible to predict and many of which are beyond the control of Devon and WPX. Important factors that may affect the actual results of Devon and WPX and cause the internal financial forecasts to not be achieved include risks and uncertainties relating to Devon’s and WPX’s businesses, industry performance, the regulatory environment, general business and economic conditions and other factors described under the section entitled “Cautionary Statement Regarding Forward-Looking Statements” in this joint proxy statement/prospectus.

In addition, the financial forecasts also reflect assumptions that are subject to change and do not reflect revised prospects for Devon’s and WPX’s businesses, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur and that was not anticipated at the time the financial forecasts were prepared. In addition, since such financial forecasts cover multiple years, the information by its nature becomes less predictive with each successive year. There can be no assurance that Devon’s, WPX’s or the combined company’s financial condition or results of operations will be consistent with those set forth in such forecasts.

The trading price and volume of the Devon Common Stock may be volatile following the merger.

The trading price and volume of the Devon Common Stock may be volatile following completion of the merger. The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of the Devon Common Stock. As a result, you may suffer a loss on your investment.

The market for Devon Common Stock will depend on a number of conditions, most of which the combined company cannot control, including:

 

   

general economic conditions within the U.S. and internationally, including changes in interest rates;

 

   

general market conditions, including fluctuations in commodity prices;

 

   

domestic and international economic, legal and regulatory factors unrelated to the combined company’s performance;

 

   

changes in oil, natural gas and NGL prices, including as a result of the actions of OPEC+;

 

   

volatility in the financial markets or other global economic factors, including the impact of COVID-19;

 

   

actual or anticipated fluctuations in the combined company’s quarterly and annual results and those of its competitors;

 

   

quarterly variations in the rate of growth of the combined company’s financial indicators, such as revenue, EBITDA, net income and net income per share;

 

   

the businesses, operations, results and prospects of the combined company;

 

   

the operating and financial performance of the combined company;

 

   

future mergers, acquisitions, dispositions and strategic alliances;

 

   

market conditions in the oil and gas industry;

 

   

changes in government regulation, taxes, legal proceedings or other developments;

 

   

shortfalls in the combined company’s operating results from levels forecasted by equity research analysts;

 

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investor sentiment toward the stock of oil and gas companies;

 

   

changes in revenue or earnings estimates, or changes in recommendations by equity research analysts;

 

   

failure of the combined company to achieve the perceived benefits of the merger, including financial results and anticipated synergies, as rapidly as or to the extent anticipated by financial or industry analysts;

 

   

speculation in the industry, press or investment community;

 

   

the failure of equity research analysts to cover the combined company’s common stock;

 

   

sales of Devon Common Stock by the combined company, large stockholders or management, or the perception that such sales may occur;

 

   

changes in accounting principles, policies, guidance, interpretations or standards;

 

   

announcements concerning the combined company or its competitors;

 

   

public reaction to the combined company’s press releases, other public announcements and filings with the SEC;

 

   

strategic actions taken by competitors;

 

   

actions taken by the combined company stockholders;

 

   

additions or departures of key management personnel;

 

   

access to the bank and capital markets on acceptable terms;

 

   

maintenance of acceptable credit ratings or credit quality;

 

   

the general state of the securities markets; and

 

   

the risk factors described in this joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus.

These and other factors may impair the market for the Devon Common Stock and the ability of investors to sell shares at an attractive price. These factors also could cause the market price and demand for the Devon Common Stock to fluctuate substantially, which may negatively affect the price and liquidity of the Devon Common Stock. Many of these factors and conditions are beyond the control of the combined company or the combined company stockholders.

Future sales or issuances of Devon Common Stock could have a negative impact on the Devon Common Stock price.

The Devon Common Stock that Devon will issue to WPX stockholders if the merger is consummated generally may be sold immediately in the public market. It is possible that some WPX stockholders will decide to sell some or all of the shares of Devon Common Stock that they receive in the merger. Any disposition by a significant stockholder of Devon Common Stock, such as EnCap, or the perception in the market that such dispositions could occur, may cause the price of Devon Common Stock to fall. Any such decline could impair the combined company’s ability to raise capital through future sales of Devon Common Stock. Further, Devon Common Stock may not qualify for investment indices and any such failure may discourage new investors from investing in Devon Common Stock.

Combined company stockholders may experience dilution in the future.

The percentage ownership of combined company stockholders may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity

 

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awards that the combined company may grant to its directors, officers and employees. Such issuances may have a dilutive effect on the combined company’s earnings per share, which could adversely affect the market price of the Devon Common Stock.

Certain employees of WPX will have rights to purchase or receive shares of Devon Common Stock after the merger as a result of the conversion of their WPX equity awards into Devon equity awards. The conversion of these WPX equity awards into Devon equity awards is described in further detail in the section entitled “The Merger Agreement—Treatment of WPX Equity Awards.” The issuance of shares of Devon Common Stock pursuant to these awards will dilute the percentage ownership of combined company stockholders. It is also expected that, from time to time after the closing of the merger, the Compensation Committee of the Devon Board will grant additional equity awards to employees and directors of the combined company under the combined company’s compensation and employee benefit plans. These additional equity awards will have a dilutive effect on the combined company’s earnings per share, which could adversely affect the market price of the Devon Common Stock.

In addition, the combined company’s certificate of incorporation will authorize the combined company to issue, without the approval of stockholders, one or more classes or series of preferred stock having such designations, powers, preferences and relative, participating, optional and other special rights, including preferences over Devon Common Stock with respect to dividends and distributions, as the Devon Board generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of the Devon Common Stock. For example, the repurchase or redemption rights or liquidation preferences that could be assigned to holders of preferred stock could affect the residual value of the Devon Common Stock. For more information, see “Description of Devon Capital Stock.”

Certain provisions contained in Devon’s restated certificate of incorporation and amended and restated bylaws, and certain provisions of Delaware law may prevent or delay an acquisition of the combined company or other strategic transactions, which could decrease the trading price of the Devon Common Stock.

The Devon certificate of incorporation and the Devon Bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirers to negotiate with the Devon Board rather than to attempt a hostile takeover.

In addition, because Devon has not chosen to be exempt from Section 203 of the DGCL, this provision could also delay or effectively prevent a change of control that some stockholders may favor. In general, Section 203 provides that persons that acquire ownership of 15% or more of the outstanding voting stock of a Delaware corporation, or an affiliate or associate of the corporation that within the prior three years did own 15% or more of the corporation’s outstanding voting stock, and the affiliates and associates of such persons (each an “interested stockholder”), will not engage in any “business combination” with that corporation or its subsidiaries, including any merger, sales and leases of assets, issuances of securities or other similar transactions, for a three-year period following the date on which that person became the owner of 15% or more of such corporation’s outstanding voting stock unless one of the following exceptions applies: (i) the Devon Board approved the business combination or the transaction that resulted in the person becoming an interested stockholder prior to the time that the person became an interested stockholder, (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder such person owned at least 85% of the outstanding voting stock of the corporation, excluding, for purposes of determining the voting stock outstanding, voting stock owned by directors who are also officers and certain employee stock plans or (iii) the transaction is approved by the Devon Board and by the affirmative vote of two-thirds of the outstanding voting stock which is not owned by the interested stockholder.

Devon believes these provisions could help to protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with the Devon Board and by providing the Devon Board with more time to assess any acquisition proposal. These provisions are not intended to make the

 

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combined company immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or effectively prevent an acquisition that the Devon Board determines is not in the best interests of the combined company and its stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

The combined company will have a significant amount of indebtedness, which will limit its liquidity and financial flexibility, and any downgrade of its credit rating could adversely impact the combined company.

As of September 30, 2020, Devon and WPX had total indebtedness of approximately $4.3 billion and $3.6 billion, respectively. Accordingly, the combined company will have substantial indebtedness following completion of the merger. In addition, subject to the limits contained in the documents governing such indebtedness, the combined company may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions or for other purposes. The combined company’s indebtedness and other financial commitments have important consequences to its business, including, but not limited to:

 

   

requiring the company to dedicate a portion of its cash flows from operations to debt service payments, thereby limiting its ability to fund working capital, capital expenditures, investments or acquisitions and other general corporate purposes;

 

   

increasing the company’s vulnerability to general adverse economic and industry conditions, including low commodity price environments; and

 

   

limiting the company’s ability to obtain additional financing due to higher costs and more restrictive covenants.

In addition, Devon and WPX receive credit ratings from rating agencies in the U.S. with respect to their indebtedness. Any credit downgrades resulting from the merger or otherwise could adversely impact the combined company’s ability to access financing and trade credit, require the combined company to provide additional letters of credit or other assurances under contractual arrangements and increase the combined company’s interest rate under any credit facility borrowing as well as the cost of any other future debt.

Moreover, the indentures governing the WPX Notes provide that in the event WPX experiences a change of control (as defined in the respective indentures) accompanied by a specified rating decline with respect to such notes, WPX must offer to repurchase such notes at 101% of their principal amount, plus accrued and unpaid interest, if any, to the date of purchase. If such a ratings decline occurs with respect to one or more series of the WPX Notes following the completion of the merger, then the combined company may be required to repurchase all or a portion of the applicable indebtedness, and may need to seek refinancing at higher costs or with other less favorable terms.

Declaration, payment and amounts of dividends, if any, distributed to stockholders of Devon will be uncertain.

Although Devon has paid cash dividends on Devon Common Stock in the past, the Devon Board may determine not to declare dividends in the future or may reduce the amount of dividends paid in the future. Any payment of future dividends will be at the discretion of the Devon Board and will depend on Devon’s results of operations, financial condition, cash requirements, future prospects and other considerations that the Devon Board deems relevant, including, but not limited to:

 

   

Devon may not have enough cash to pay such dividends or to repurchase shares due to its cash requirements, capital spending plans, cash flow or financial position;

 

   

decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of the Devon Board, which could change its dividend practices at any time and for any reason;

 

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Devon’s desire to maintain or improve the credit ratings on its debt; and

 

   

the amount of dividends that Devon may distribute to its stockholders is subject to restrictions under Delaware law.

Stockholders should be aware that they have no contractual or other legal right to dividends that have not been declared.

The combined company may record goodwill and other intangible assets that could become impaired and result in material non-cash charges to the results of operations of the combined company in the future.

The combined company will account for the merger as an acquisition of a business in accordance with GAAP. Under the acquisition method of accounting, the assets and liabilities of WPX and its subsidiaries will be recorded, as of completion, at their respective fair values and added to Devon’s. The combined company’s reported financial condition and results of operations for periods after completion of the merger will reflect WPX’s balances and results after completion of the merger but will not be restated retroactively to reflect the historical financial position or results of operations of WPX and its subsidiaries for periods prior to the merger.

Under the acquisition method of accounting, the total purchase price is allocated to WPX’s identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair market values as of the date of completion of the merger, with any excess purchase price allocated to goodwill. To the extent the value of goodwill or intangibles, if any, becomes impaired in the future, the combined company may be required to incur material non-cash charges relating to such impairment. The combined company’s operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.

Following the closing of the merger, Devon will incorporate WPX’s hedging activities into Devon’s business, and Devon may be exposed to additional commodity price risks arising from such hedges.

To mitigate its exposure to changes in commodity prices, WPX hedges oil, natural gas and NGL prices from time to time, primarily through the use of certain derivative instruments, including fixed price swaps, basis swaps and costless collars. Devon will bear the economic impact of all of WPX’s current hedges following the closing of the merger. Actual crude oil, natural gas and NGL prices may differ from the combined company’s expectations and, as a result, such hedges may or may not have a negative impact on Devon’s business.

Following the merger, the market price of Devon Common Stock may be depressed by the perception that EnCap may sell the shares of Devon Common Stock it will acquire at closing and for other reasons related to the merger.

Subject to applicable securities law, following their receipt of shares of Devon Common Stock in the merger, former WPX stockholders, including EnCap, may seek to sell the shares of Devon Common Stock delivered to them. In addition, Devon and EnCap have agreed to enter into a registration rights agreement (the “New Felix Registration Rights Agreement”) concurrently with the consummation of the merger. Pursuant to the New Felix Registration Rights Agreement, among other things and subject to certain restrictions, Devon is required to file with the SEC a registration statement on Form S-3 registering for resale the shares of Devon Common Stock issued to EnCap in the merger and to conduct certain underwritten offerings upon EnCap’s request. The New Felix Registration Rights Agreement also provides EnCap with customary piggyback registration rights. The New Felix Registration Rights Agreement will be entered into in connection with the consummation of the merger.

In addition to sales by EnCap, other stockholders may seek to sell shares of Devon Common Stock held by them following, or in anticipation of, completion of the merger. These sales (or the perception that these sales

 

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may occur), coupled with the increase in the outstanding number of shares of Devon Common Stock, may affect the market for, and the market price of, shares of Devon Common Stock in an adverse manner.

EnCap will become a significant holder of Devon Common Stock following completion of the merger.

Upon the completion of the merger, EnCap is expected to own approximately 14% of Devon Common Stock, representing approximately 14% of the combined voting power in Devon. As a result, EnCap will have the ability to influence Devon’s management and affairs. Further, the existence of a new significant stockholder may have the effect of deterring hostile takeovers, delaying or preventing changes in control or changes in management, or limiting the ability of Devon’s other stockholders to approve transactions that they may deem to be in the best interests of Devon.

So long as EnCap continues to control a significant amount of Devon Common Stock, it will continue to be able to influence all matters requiring stockholder approval. In any of these matters, the interests of EnCap may differ or conflict with the interests of other Devon stockholders. In addition, EnCap and its affiliates may, from time to time, acquire interests in businesses that directly or indirectly compete with Devon’s business or of Devon’s significant existing or potential customers. EnCap and its affiliates may acquire or seek to acquire assets that Devon seeks to acquire and, as a result, those acquisition opportunities may not be available to Devon or may be more expensive for Devon to pursue. Moreover, this concentration of stock ownership may also adversely affect the trading price of Devon Common Stock to the extent investors perceive a disadvantage in owning stock of a company with a significant stockholder.

EnCap will have the right to nominate a director for appointment and election to the Devon Board.

Pursuant to the New Felix Stockholders’ Agreement, EnCap will have the right to nominate a director for appointment and election to the Devon Board. EnCap’s right to nominate a director is subject to, among other things, EnCap continuing to collectively beneficially hold at least ten percent (10%) of the outstanding shares of the Devon Common Stock and the nominee being reasonably acceptable to the Governance Committee of the Devon Board and not being prohibited by law from serving in such capacity or causing Devon to not to be in compliance with applicable law.

Following the expiration of the New Felix Stockholders’ Agreement lock-up period, EnCap will be permitted to sell their holdings in the combined company, provided, that one-third of its shares are not subject to the lock-up and can immediately be sold.

Pursuant to the New Felix Stockholders’ Agreement, EnCap will agree that, subject to certain exceptions, during the period commencing at the Effective Time and continuing for 180 days thereafter, it will not sell, transfer, assign, pledge, encumber or otherwise dispose of, directly or indirectly, two-thirds of its shares of Devon Common Stock that EnCap receives as merger consideration, without the prior written consent of Devon. Following such time period, EnCap will no longer be subject to such restriction and may decide to sell any or all of their shares of Devon Common Stock. Moreover, the lock-up restrictions in the New Felix Stockholders’ Agreement do not apply to one-third of the shares of Devon Common Stock that EnCap will receive as merger consideration. As a result, EnCap will be able to freely sell or otherwise transfer such one-third of its shares at any time following the consummation of the merger.

Risks Relating to WPX’s Business

You should read and consider risk factors specific to WPX’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in WPX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 216 of this document for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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Risks Relating to Devon’s Business

You should read and consider risk factors specific to Devon’s business that will also affect the combined company after the merger. These risks are described in the sections entitled “Risk Factors” in Devon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in other documents incorporated by reference into this joint proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information” beginning on page 216 of this document for the location of information incorporated by reference into this joint proxy statement/prospectus.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements and information in this joint proxy statement/prospectus may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “predict,” “budget,” “should,” “would,” “could,” “attempt,” “appears,” “forecast,” “outlook,” “estimate,” “continue,” “project,” “projection,” “goal,” “model,” “target,” “potential,” “may,” “will,” “objective,” “guidance,” “outlook,” “effort,” “are likely” and other similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements are based on Devon’s and WPX’s current expectations and beliefs concerning future developments and their potential effect on their respective businesses.

The forward-looking statements contained in this document are largely based on Devon’s and WPX’s expectations for the future, which reflect certain estimates and assumptions made by their respective managements. These estimates and assumptions reflect Devon’s and WPX’s best judgment based on currently known market conditions, operating trends and other factors. Although Devon and WPX believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond Devon’s and WPX’s control. As such, managements’ assumptions about future events may prove to be inaccurate. For a more detailed description of the risks and uncertainties involved, see “Risk Factors” in Devon’s and WPX’s most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other SEC filings. Devon and WPX do not intend to publicly update or revise any forward-looking statements as a result of new information, future events, changes in circumstances or otherwise.

These cautionary statements qualify all forward-looking statements attributable to Devon or WPX, or persons acting on either’s behalf. Devon management and WPX management caution you that the forward-looking statements contained in this joint proxy statement/prospectus are not guarantees of future performance, and neither Devon nor WPX can assure you that such statements will be realized or that the events and circumstances they describe will occur. Factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements herein include, but are not limited to:

 

   

the risk that Devon or WPX may be unable to obtain governmental and regulatory approvals required for the transaction, or that required governmental and regulatory approvals may delay the transaction or result in the imposition of conditions that could reduce the anticipated benefits from the merger or cause the parties to abandon the merger;

 

   

the risk that a condition to closing of the transaction may not be satisfied;

 

   

the length of time necessary to consummate the merger, which may be longer than anticipated for various reasons;

 

   

the risk that the businesses will not be integrated successfully;

 

   

the risk that the cost savings, synergies and growth from the merger may not be fully realized or may take longer to realize than expected;

 

   

the diversion of management time on transaction-related issues;

 

   

the effect of future regulatory or legislative actions on the companies or the industries in which they operate;

 

   

the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect;

 

   

potential liability resulting from pending or future litigation;

 

   

changes in the general economic environment, or social or political conditions, that could affect the businesses;

 

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the potential impact of the announcement or consummation of the merger on relationships with customers, providers, vendors, competitors, management and other employees;

 

   

the ability to hire and retain key personnel;

 

   

reliance on and integration of information technology systems;

 

   

the risks associated with assumptions the parties make in connection with the parties’ critical accounting estimates and legal proceedings;

 

   

the volatility of oil, gas and NGL prices;

 

   

uncertainties inherent in estimating oil, gas and NGL reserves;

 

   

impact of reduced demand for the companies’ products and products made from them due to governmental and societal actions taken in response to the COVID-19 pandemic;

 

   

the uncertainties, costs and risks involved in Devon’s and WPX’s operations, including as a result of employee misconduct;

 

   

natural disasters and epidemics;

 

   

counterparty credit risks;

 

   

risks relating to Devon’s and WPX’s indebtedness;

 

   

risks related to Devon’s and WPX’s hedging activities;

 

   

competition for assets, materials, people and capital;

 

   

regulatory restrictions, compliance costs and other risks relating to governmental regulation, including with respect to environmental matters;

 

   

cyberattack risks;

 

   

Devon’s and WPX’s limited control over third parties who operate some of their respective oil and gas properties;

 

   

midstream capacity constraints and potential interruptions in production;

 

   

the extent to which insurance covers any losses WPX or Devon may experience;

 

   

risks related to investors attempting to effect change;

 

   

general domestic and international economic and political conditions, including the impact of COVID-19;

 

   

the impact of a prolonged federal, state or local government shutdown and threats not to increase the federal government’s debt limit; and

 

   

changes in tax, environmental and other laws, including court rulings, applicable to Devon’s and WPX’s business.

All subsequent written and oral forward-looking statements concerning Devon, WPX, the merger, the combined company or other matters and attributable to Devon or WPX or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. Devon and WPX assume no duty to update or revise their respective forward-looking statements based on new information, future events or otherwise.

 

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THE PARTIES TO THE MERGER

Devon Energy Corporation

333 W. Sheridan Ave.

Oklahoma City, Oklahoma 73102-5015

(405) 235-3611

Devon is an independent energy company engaged primarily in the exploration, development and production of oil, natural gas and NGLs. Devon’s operations are concentrated in various onshore areas in the U.S. In June 2019, Devon completed the sale of substantially all of its oil and gas assets and operations in Canada. In October 2020, Devon completed the sale of its Barnett Shale assets. Shares of Devon Common Stock are listed and traded on the NYSE under the ticker symbol “DVN.” Additional information about Devon and its subsidiaries, including, but not limited to, information regarding its business, properties, legal proceedings, financial statements, financial condition and results of operations, market risk, executive compensation and related party transactions is set forth in Devon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and Devon’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, which are each incorporated by reference into this joint proxy statement/prospectus.

For more information about Devon, please visit Devon’s website at www.devonenergy.com. The information contained on Devon’s website or accessible through it does not constitute a part of this joint proxy statement/prospectus.

WPX Energy, Inc.

3500 One Williams Center

Tulsa, Oklahoma 74172-0172

(855) 979-2012

WPX is an independent oil and natural gas exploration and production company engaged in the development of long-life unconventional properties. WPX is focused on profitably exploiting, developing and growing its oil positions in the Delaware Basin (a subset of the Permian Basin) in Texas and New Mexico and the Williston Basin in North Dakota. Shares of WPX Common Stock are listed and traded on the NYSE under the ticker symbol “WPX.” Additional information about WPX and its subsidiaries, including, but not limited to, information regarding its business, properties, legal proceedings, financial statements, financial condition and results of operations, executive compensation and related party transactions is set forth in WPX’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and WPX’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020, which are each incorporated by reference into this joint proxy statement/prospectus.

For more information about WPX, please visit WPX’s website at www.wpxenergy.com. The information contained on WPX’s website or accessible through it does not constitute a part of this joint proxy statement/prospectus.

East Merger Sub, Inc.

333 W. Sheridan Ave.

Oklahoma City, Oklahoma 73102-5015

(405) 235-3611

Merger Sub is a wholly-owned, direct subsidiary of Devon. Merger Sub was formed by Devon solely in contemplation of the merger, has not conducted any business and has no assets, liabilities or other obligations of any nature other than as set forth in the Merger Agreement.

 

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THE MERGER

The following discussion contains certain information about the proposed merger. This discussion is subject, and qualified in its entirety by reference, to the Merger Agreement attached as Annex A to this joint proxy statement/prospectus. You are urged to carefully read this entire joint proxy statement/prospectus, including the Merger Agreement, before making any investment or voting decision.

Transaction Structure

Upon the terms and subject to the conditions set forth in the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into WPX, the separate corporate existence of Merger Sub will cease and WPX will continue as the surviving corporation in the merger as a wholly-owned, direct subsidiary of Devon.

Consideration to WPX stockholders

At the Effective Time, by virtue of the merger and without any further action on the part of Devon, Merger Sub, WPX or any holder of capital stock thereof:

 

   

each share of WPX Common Stock held immediately prior to the Effective Time by Devon, Merger Sub or any of Devon’s other subsidiaries, or by WPX or any of WPX’s subsidiaries (collectively, the “Excluded Shares”), will be canceled and retired and will cease to exist, and no consideration will be delivered in exchange therefor; and

 

   

subject to the Merger Agreement, each share of WPX Common Stock issued and outstanding (other than Excluded Shares) immediately prior to the Effective Time will be converted into the right to receive from Devon 0.5165 fully paid and nonassessable shares of Devon Common Stock.

In addition, each outstanding WPX equity award in respect of WPX Common Stock will be treated as described in “The Merger Agreement—Treatment of WPX Equity Awards.”

Background of the Merger

The WPX Board and WPX management, in the ordinary course and consistent with their fiduciary duties, continually evaluate WPX’s operations with a focus on generating long-term value by leveraging assets to create efficiencies, growing free cash flow and returning cash to stockholders. In connection with such evaluation, the WPX Board and WPX management also review and assess potential strategic alternatives available to WPX, including mergers and acquisition transactions. As part of such assessment, WPX management has contacts with other public and private E&P companies from time to time.

The Devon Board and Devon’s management regularly review Devon’s performance, prospects and strategy in light of current and expected business and economic conditions, developments in the oil and gas exploration and production sector, and Devon’s position in the industry. These reviews have included the evaluation of potential strategic combinations and acquisition and divestiture opportunities. To that end, from time to time, senior management of Devon has engaged in discussions with other companies regarding potential business combination, joint venture, and other strategic transactions to enhance stockholder value and further the strategic objectives of Devon. The Devon Board was regularly briefed on these discussions.

Beginning in February 2018 and continuing through 2019, WPX engaged in numerous discussions with Felix regarding WPX’s potential acquisition of Felix, and in December 2019, WPX and Felix entered into a purchase agreement related to the acquisition.

 

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As the result of its strategic review process in 2018, the Devon Board adopted a plan to pursue capital-efficient cash-flow growth, portfolio simplification, debt reduction, and the return of excess cash flow from operations to its stockholders. In furtherance of this strategic plan, during 2018, Devon divested its interests in EnLink Midstream Partners, LP and EnLink Midstream, LLC (Devon’s former midstream affiliates), and in 2019, Devon sold its Canadian business and announced the sale of its Barnett Shale assets, completing its transition to a U.S. oil company focused on four U.S. oil and liquids plays located in the Delaware Basin, Anadarko Basin, Powder River Basin and Eagle Ford.

In May 2019, David Hager, Devon’s president and chief executive officer, met with Richard Muncrief, WPX’s chairman and chief executive officer. During the meeting, Messrs. Hager and Muncrief discussed issues facing the industry generally, including the need for consolidation. Mr. Hager expressed his belief that investors would generally only be supportive of transactions with little to no premium paid. Mr. Hager told Mr. Muncrief that Devon would be interested in exploring a potential combination of Devon and WPX on a low to no premium basis. Mr. Muncrief told Mr. Hager that he would consider whether to explore such a transaction. Mr. Muncrief subsequently reported the discussion to the WPX Board.

In August 2019, Messrs. Hager and Muncrief met again, and after further discussion decided not to explore a combination of Devon and WPX.

In the fall of 2019, WPX management was contacted by a representative of Company A seeking to explore a potential combination between WPX and Company A. Given the potential strategic fit, WPX and Company A executed a mutual confidentiality agreement to facilitate the analysis of a transaction. After a thorough analysis over several weeks, WPX informed Company A of its intention not to pursue a transaction.

In March 2020, WPX completed its acquisition of Felix. On April 17, 2020, Mr. Hager held a telephone call with Mr. Muncrief to discuss issues facing the industry generally, including the Saudi Arabian /Russian oil price war and the COVID-19 pandemic.

Over several weeks in the spring and early summer of 2020, Mr. Muncrief met with or had telephone calls with the Chief Executive Officer of Company B to discuss the industry in general, their two companies in particular and a potential combination between them. Mr. Muncrief and the Chief Executive Officer of Company B had several discussions but no formal proposal was made.

During June and the early part of July 2020, WPX management further considered the benefits of a potential “merger of equals” with Devon, including the benefits of the combined balance sheet (including the significant amount of cash held by Devon and the extended nature of its debt maturities), the potential free cash flow generated by the combined business, the ability to accelerate WPX’s transition to returning cash to shareholders and the potential re-rating of the combined company to investment grade with the potential to enjoy a higher trading multiple for the combined company’s equity.

On July 10, 2020, Messrs. Hager and Muncrief met and discussed their respective perspectives of the issues facing the oil and gas industry generally. They again discussed the need for industry consolidation. Messrs. Hager and Muncrief discussed their mutual belief that investors would only be supportive of transactions with a low or no premium. Mr. Muncrief told Mr. Hager that, after an analysis of various alternatives and discussion with the WPX Board, WPX management was interested in exploring a merger-of-equals transaction with Devon (the “Potential Transaction”). Mr. Hager noted that Devon had long considered WPX as an excellent strategic fit with Devon. Messrs. Hager and Muncrief discussed the potential merits of, and other considerations associated with, the Potential Transaction, including that a combined company would have scale to more effectively operate in the current market environment, that a combined company could achieve significant synergies and that a combination had the potential to create significant value for each company’s stockholders. They agreed that numerous matters would need to be addressed in connection with the Potential Transaction, including due diligence, financial terms and the governance of a combined company. In that regard, they discussed the

 

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possibility of Mr. Muncrief becoming chief executive officer and Mr. Hager becoming executive chairman of a combined company. At the conclusion of this discussion, Mr. Hager told Mr. Muncrief that he would discuss the possibility of exploring the potential combination with the Devon Board on the basis of a low to no premium transaction. After the meeting, Mr. Hager informed Mr. Duane Radtke, the chairman of the Devon Board, of his meeting with Mr. Muncrief.

On July 15, 2020, at a regularly scheduled board meeting, the WPX Board discussed the industry environment, WPX’s positioning in the upstream sector and investor perception of WPX. As part of this discussion, the WPX Board considered certain strategic alternatives in light of WPX’s five-year goals of becoming a top 10 oil producer in the US, increasing free cash flow yield, implementing a dividend and increasing return on capital employed. These strategic alternatives included (1) remaining a standalone company, focused on becoming a leading mid-cap E&P yield vehicle, (2) consolidation and (3) monetizing through a sale to another competitor. With respect to consolidation, WPX management evaluated over 30 potential transaction partners over a number of months, including Devon, and only a limited number of potential transaction partners met the criteria determined by the WPX Board and management when considering acceptable alternatives. In addition to capturing efficiencies from added scale, growing free cash flow and returning cash to shareholders, WPX also considered other criteria for potential transaction partners, including leverage, asset fit, commodity mix and cost structure. Further, WPX considered pro forma ownership and challenges related to management integration, among other criteria. After a robust discussion regarding strategic alternatives and the benefits and drawbacks of such alternatives, the WPX Board determined that WPX should remain independent while remaining open to consolidation opportunities.

Following the WPX Board meeting, the WPX management team continued to evaluate the Potential Transaction. Given the impact of the COVID-19 pandemic on the global economy and oil demand, and the historic collapse in global oil prices resulting from the Saudi Arabian /Russian price war, the WPX management team preliminarily determined that the Potential Transaction had the potential to provide an immediately accretive opportunity that would be consistent with WPX’s strategic focus on creating efficiencies, growing free cash flow, improving its balance sheet and returning cash to stockholders, while building a leading position in the Delaware Basin. Further, Devon stood out over other opportunities with its significant amount of cash on hand and complementary debt maturity profile that would allow the combined company to reduce WPX debt, accelerate the return of cash to shareholders and thrive in different commodity price cycles.

On July 17, 2020, at a special meeting of the Devon Board, with certain members of Devon management in attendance, Mr. Hager updated the Devon Board regarding his July 10, 2020 meeting with Mr. Muncrief. Members of the Devon management team provided an overview of WPX’s assets, operations and financial position and discussed with the Devon Board certain strategic, operational and financial considerations with respect to the Potential Transaction. Following discussion, the Devon Board authorized Mr. Hager to discuss the topic of exploring the potential combination with Mr. Muncrief while keeping the Devon Board apprised of the status of his discussions.

Later on July 17, 2020, Mr. Hager met with Mr. Muncrief, and Mr. Hager conveyed that the Devon Board was supportive of him exploring the Possible Transaction with Mr. Muncrief on a low or no premium basis. Messrs. Hager and Muncrief discussed the relative merits of a merger-of-equals transaction, as well as the leadership of a combined company. Between July 17, 2020 and July 28, 2020, Messrs. Hager and Muncrief discussed on several occasions the relative merits of a business combination of Devon and WPX, as well as issues regarding governance of a combined entity. Mr. Muncrief noted that he would discuss the social issues with Kelt Kindick, WPX’s lead independent director.

On July 20, 2020, Devon contacted its regular outside counsel, Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), to represent Devon in connection with the Potential Transaction. Skadden confirmed that there were no existing conflicts of interest.

On July 28, 2020, Messrs. Hager and Muncrief agreed that there was sufficient interest from both companies to pursue the Potential Transaction and decided that the parties should enter into a confidentiality agreement and begin exchanging due diligence materials.

 

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On July 30, 2020, Devon and WPX entered into a mutual confidentiality agreement. The confidentiality agreement subjected each of Devon and WPX to a customary standstill obligation regarding the other party but permitted each party to submit a confidential, non-public proposal or counter proposal for a negotiated transaction to the other party. The confidentiality agreement also contained a “fall away” provision rendering the standstill obligations inapplicable to a party if any other person acquires or proposes to acquire more than 40% of the outstanding voting securities or assets of the other party or the other party enters into an agreement with any other person providing for a business combination transaction pursuant to which the then outstanding voting securities of the other party would not represent at least 40% of the outstanding voting securities of the surviving company. Following execution of the mutual confidentiality agreement, over the next eight weeks, management and outside advisors of each of Devon and WPX exchanged materials, conducted preliminary structuring, financial and operational due diligence regarding a potential combination (including a review of assets and liabilities), and analyzed the achievable synergies of the combined company following a combination transaction.

On July 31, 2020, at a special meeting of the Devon Board, with certain members of Devon management in attendance, Mr. Hager reviewed the strategic rationale for, and the potential benefits to Devon’s stockholders of, a business combination with WPX and the status of discussions with WPX. Devon management reviewed the financial and operational due diligence completed to date.

Approximately each week in August and September 2020, Messrs. Hager and Muncrief had telephone calls to discuss the Potential Transaction, including expected synergies, the business strategy for the combined company, each party’s progress on due diligence and the potential timing of the Potential Transaction. During these conversations, Messrs. Hager and Muncrief also discussed various social issues including board size and composition, the composition of the senior leadership team, organizational structure, and headquarters.

On August 5, 2020, WPX representatives contacted Kirkland & Ellis LLP (“Kirkland”) to discuss the engagement of Kirkland on the Potential Transaction. WPX management believed that Kirkland was uniquely qualified to serve as WPX’s legal advisor on the Potential Transaction given its extensive experience with similar transactions involving oil and gas companies. Upon confirming that there were no existing conflicts, Kirkland was formally engaged as legal advisor to WPX.

On or about August 12, 2020, Devon contacted J.P. Morgan to engage J.P. Morgan as Devon’s financial advisor on the Potential Transaction based on, among other things, J.P. Morgan’s industry experience and performance, as well as its long-standing relationship with, and knowledge of, Devon.

On August 12, 2020, WPX representatives contacted Citigroup Global Markets Inc. (“Citi”) to discuss the engagement of Citi as WPX’s financial advisor on the Potential Transaction. The WPX management believed that Citi was qualified and well-suited to act as WPX’s financial advisor based on, among other things, Citi’s reputation, experience and familiarity with WPX, Devon and their respective businesses. WPX subsequently engaged Citi as its financial advisor.

On August 20, 2020, the WPX Board held a virtual meeting and WPX management provided an overview of Devon, a review of potential risks relating to Devon’s federal land holdings, an overview of pro forma metrics and an update on the diligence being conducted in connection with the Potential Transaction. Following the WPX Board meeting, Mr. Muncrief telephoned Mr. Hager to provide an update and discuss next steps.

On August 21, 2020, at a special meeting of the Devon Board with certain members of Devon management and representatives of J.P. Morgan in attendance, Mr. Hager reviewed the status of discussions with Mr. Muncrief regarding key governance issues, including board representation and the senior leadership team of the combined company. In addition, Mr. Hager and Jeff Ritenour, Devon’s chief financial officer, discussed the status of Devon’s due diligence review of WPX. Representatives of J.P. Morgan provided a general overview of the market and industry trends, a discussion of WPX’s financial position based on publicly available information and other related information.

 

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On August 31, 2020, representatives of Kirkland and Skadden discussed structuring alternatives for the Potential Transaction.

On September 2, 2020, senior management of WPX and Devon met and provided the other with a business and financial overview of WPX and Devon, as applicable. In addition, the parties discussed the status of their due diligence efforts, the advantages of the Potential Transaction, including a preliminary discussion on potential synergies, and the next steps to advance the Potential Transaction. The parties identified approximately $275 million in annual synergies, incremental to the already identified $300 million in Devon cost reduction efforts, that could benefit the combined company. The WPX management team was encouraged by Devon’s operational performance, cost reduction efforts, commitment to technology and innovation, and commitment to environmental, social and governance matters. The parties discussed the complementary nature of the Delaware Basin assets, the proximity of operations and the potential to integrate the assets, connect infrastructure and extract operating efficiencies.

On September 4, 2020, Skadden delivered to Kirkland an initial draft of the Merger Agreement. The draft contemplated, among other things: (i) a transaction in which a wholly-owned subsidiary of Devon would be merged with WPX, with WPX surviving the transaction; (ii) largely reciprocal representations and warranties and operating covenants each party would be bound by during the period between the signing of the Merger Agreement and the closing of the Potential Transaction; (iii) largely reciprocal non-solicitation provisions applicable to WPX and Devon that would allow each of the WPX Board and the Devon Board, under certain circumstances, to change its recommendation in the event of a superior proposal or intervening event; (iv) a “force the vote” provision requiring each of WPX and Devon to submit the approval and adoption of the Merger Agreement or the issuance of Devon Common Stock, as applicable, to its stockholders notwithstanding any change in recommendation by the WPX Board or Devon Board, as applicable; (v) a termination fee equal to 4.25% of WPX’s implied equity value payable by each party under certain circumstances; and (vi) expense reimbursement capped at $20,000,000 payable by each party under certain circumstances and in addition to any payable termination fee. Kirkland discussed these terms and other provisions of the draft Merger Agreement with representatives of WPX on several occasions over the following days. The initial draft of the Merger Agreement did not specifically address the composition of the combined company board of directors or executive management and did not address whether the Potential Transaction would be taxable to WPX stockholders. Skadden also noted to Kirkland that, as a condition to its willingness to enter into a merger agreement, Devon would expect EnCap to enter into a support agreement, and Skadden committed to separately provide a draft of such support agreement. Over the course of the following three weeks, Skadden and Kirkland, as well as representatives of Devon and WPX, completed their due diligence and continued to negotiate the terms of the Merger Agreement.

Later on September 4, 2020, the Devon Board held a special meeting with certain members of Devon management and representatives of J.P. Morgan and Skadden in attendance. Mr. Hager and Devon management updated the Devon Board on the status of discussions with WPX and the results of financial and operational due diligence to date, including preliminary views on potential synergies. Representatives of Skadden discussed legal matters with the Devon Board, including the fiduciary duties of directors in the context of considering a strategic business combination transaction. Representatives of J.P. Morgan provided preliminary views regarding certain financial aspects of the Potential Transaction. Following the discussion, the Devon Board authorized Mr. Hager and the other members of Devon’s senior management team to continue their discussions with WPX regarding the Potential Transaction, including the exchange of information with WPX to better understand WPX’s business and assets, confirm the potential for synergies that could be realized and further discuss the potential governance structure of the combined company.

Also on September 4, 2020, Mr. Muncrief received a call from the Chief Executive Officer of an energy company (“Company C” and such individual, the “Company C representative”), to discuss setting up a lunch meeting. Mr. Muncrief had previously met with the Company C representative in October and December of 2019. During the December 2019 meeting, the Company C representative had delivered to Mr. Muncrief a

 

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preliminary indication of interest proposing an acquisition of WPX by Company C. The preliminary indication of interest contemplated a premium to the market price of WPX’s common stock at that time of receipt and was subject to confirmatory due diligence and negotiation of a mutually acceptable definitive merger agreement. Following extensive discussions, the WPX Board determined in its business judgment that it was in the best interests of WPX to move forward with a transaction to acquire Felix based on the advanced stage of negotiations with Felix, the strategic rationale for the transaction and anticipated benefits thereof. Following the acquisition of Felix, Mr. Muncrief and the Company C representative continued to discuss the current industry environment and the performance of WPX and Company C, generally, with May 19, 2020 being the last conversation the parties had prior to the September 4, 2020 telephone call.

On September 7, 2020, Skadden delivered to Kirkland an initial draft of the EnCap Support Agreement, which provided for, among other things, the agreement of certain affiliates of EnCap to vote all of their shares of WPX Common Stock held as of the date of the Merger Agreement (i) in favor of the adoption of the Merger Agreement, (ii) against any alternative proposal, and (iii) against any amendment of WPX’s certificate of incorporation or bylaws or other proposal that would delay, impede, frustrate, prevent or nullify the Potential Transaction or Merger Agreement or change in any manner the voting rights of any outstanding stock of WPX. As of September 26, 2020, EnCap was the beneficial owner of approximately 27.3% of the outstanding shares of WPX Common Stock.

From early September through September 26, 2020, Devon and WPX and their respective legal counsel and EnCap and its legal advisor, Vinson & Elkins LLP (“Vinson & Elkins”), exchanged multiple drafts of the Merger Agreement and other ancillary agreements, as applicable, including the EnCap Support Agreement, and held multiple conference calls to discuss due diligence and the transaction agreements and various issues, including the combined company’s management team and board composition. The discussions and negotiations included numerous telephone conversations between the parties’ management teams, representatives and advisors.

On September 9, 2020, the WPX Board held a virtual meeting that was attended by WPX management and representatives from Kirkland and Citi. The meeting was called to discuss fiduciary duties, the relative contributions of WPX and Devon in the Potential Transaction, and preliminary considerations in the Merger Agreement and the EnCap Support Agreement. Specifically, members of WPX management discussed Devon’s recent and projected financial performance, as well as Devon’s assets and operations, including the extent to which Devon’s acreage in the Delaware Basin and the Powder River Basin is subject to federal leaseholds. The WPX Board and WPX’s management and advisors also discussed the rationale for a potential combination with Devon, including but not limited to, increased scale, financial strength and free cash flow yield.

On September 11, 2020, Mr. Muncrief had lunch with the Company C representative. During the meeting, Mr. Muncrief and the Company C representative continued their discussion on the current industry environment, and the Company C representative again expressed an interest in a potential combination with WPX. The Company C representative delivered to Mr. Muncrief a proposal with respect to the potential acquisition by Company C of all of the WPX Common Stock at a fixed exchange ratio, with the consideration split 80% in stock and 20% in cash, for an implied value of $6.20 per WPX share. Company C’s proposal was subject to confirmatory due diligence and negotiation of a mutually acceptable definitive merger agreement.

On September 11, 2020, the Devon Board held a special meeting with certain members of Devon management and representatives of Skadden in attendance. Devon management provided an update regarding the ongoing financial and operational due diligence conducted on WPX to date, including expected synergies from the Potential Transaction. Representatives of Skadden discussed legal matters with the Devon Board, including a summary of the terms of the draft Merger Agreement. Mr. Hager discussed with the Devon Board the expected schedule to complete Devon’s due diligence analysis.

 

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Also on September 11, 2020, Kirkland delivered a revised draft of the Merger Agreement to Skadden. The revised draft included the following key points: (i) removal of the “force the vote” provision applicable to each party and provisions allowing each of the WPX Board and the Devon Board to terminate the Merger Agreement for a superior proposal, (ii) the termination fee percentage was bifurcated and decreased to 3.0% of each party’s equity value, (iii) any expense reimbursement paid on termination of the Merger Agreement would be deducted from any termination fee payable, and (iv) the merger would be structured as a tax free reorganization and included a closing condition that the parties obtain an opinion to such effect.

On September 12, 2020, Messrs. Hager, Muncrief, Radtke and Kindick met to discuss industry conditions and the need for consolidation, the potential benefits of a combination of Devon and WPX, including possible synergies, the business plan for a combined company, including strategy and the variable dividend model, and potential investor reaction to the Potential Transaction.

On September 13, 2020, the WPX Board held a virtual meeting with respect to the Potential Transaction. During the first portion of the meeting, which was attended by all directors and representatives of Kirkland, Mr. Muncrief updated the WPX Board on the meeting that he and Mr. Kindick had with Messrs. Hager and Radtke, the chairman of the Devon Board on the prior day. Mr. Muncrief also apprised the WPX Board of his meeting with the Company C representative on September 11 and Company C’s proposal, which had been provided to the WPX Board in advance of the meeting. Following Mr. Muncrief’s update, Kirkland discussed the WPX Board’s fiduciary duties under the circumstances and in light of the differing transactions presented by Devon and Company C. Kirkland discussed a process that the WPX Board should consider when evaluating both transactions. The WPX Board then discussed the proposal from Company C.

Following the Board’s discussion of Company C’s proposal, members of WPX management and representatives from Citi joined the meeting. The WPX Board considered certain information provided by Citi regarding Citi’s material investment banking relationships with WPX and Devon during the prior two-year period, and the WPX Board determined that Citi did not have any disqualifying conflicts of interests in serving as a financial advisor to WPX. Citi then discussed with the WPX Board certain preliminary financial matters relating to the Potential Transaction. Robert Herdman, the chairman of WPX’s Compensation Committee, then provided an overview of certain changes to WPX’s compensation arrangements that the Compensation Committee expected to propose in connection with the Potential Transaction. Following a discussion, the WPX Board met in executive session without Mr. Muncrief and Clay Gaspar, WPX’s president, chief operating officer and a director, present. Kirkland was also present for a portion of such executive session. After the meeting, Citi was informed of Company C’s proposal and was requested to provide certain financial information relating to the Potential Transaction and Company C’s proposal for the WPX Board to consider at its next meeting.

On September 14, 2020, Messrs. Hager and Muncrief discussed the composition of the senior leadership team and potential roles and responsibilities. Mr. Muncrief proposed that the exchange ratio be determined based on a 30-day VWAP. Mr. Hager reiterated that the exchange ratio should reflect an “at market” or low to no premium transaction, and deferred discussion of the exchange ratio until closer to the execution of a merger agreement.

On September 15 and 16, 2020, the WPX Board held a virtual regularly scheduled meeting, a portion of which was attended by representatives of Kirkland and Citi on September 16. At the meeting, Mr. Muncrief and WPX management updated the WPX Board on the status of negotiations with Devon and the companies’ ongoing financial modeling and due diligence. Citi then reviewed with the WPX Board certain preliminary financial aspects of Company C’s proposal based on, among other things, WPX’s management forecasts, Company C’s then-current stock price and a range of hypothetical stock prices and certain illustrative pro forma financial metrics utilizing publicly available research analysts’ estimates for Company C.

 

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The WPX Board then further discussed Company C’s proposal and the various potential benefits of a transaction with Company C, including: (i) the fact that Company C contemplated offering a premium to WPX’s stockholders; (ii) Company C’s established dividend policy and low leverage; (iii) Company C’s commitment to strong environmental, social and governance performance; (iv) the ability of WPX stockholders to participate in a larger company with greater scale and (v) potentially lower transaction integration and execution risk. The WPX Board also evaluated a number of other considerations that militated against a sale of WPX to Company C, including: (i) that Company C’s proposal was subject to due diligence; (ii) the risk of a downward movement or adjustment in Company C’s proposed exchange ratio prior to signing, which could delay or result in the abandonment of a transaction; (iii) the per share value for WPX Common Stock implied by Company C’s proposal was based on recent trading levels for WPX at a relatively low point for WPX and the energy market generally; (iv) the premium associated with Company C’s proposal (and thus the value of stock received by WPX stockholders) could be diminished if its stockholders reacted negatively to the transaction; (v) the inclusion of cash as transaction consideration would result in WPX stockholders effectively selling a portion of their shares at a low point in the market for energy companies; (vi) the fact that Company C trades at a meaningfully higher multiple of cash flow per share than WPX or Devon, which could mean that the stock received by WPX stockholders would not have the same upside as Devon’s stock; and (vii) the insignificant ownership of WPX stockholders in the combined company and the consequent inability to have a meaningful influence on the future strategic direction of Company C and to participate in the potential synergies resulting from a transaction with Company C.

The WPX Board also discussed the potential benefits resulting from a transaction with Devon, including: (i) the transaction should provide WPX stockholders with the potential for long-term economic appreciation based on the perceived benefits of a transaction with Devon; (ii) the use of Devon stock for 100% of the transaction consideration, which would give WPX stockholders greater participation in any energy market recovery; (iii) improved liability management with the combined debt maturity profile and ability to use Devon’s cash on hand to more easily reduce WPX debt; (iv) the significant synergies expected to be achieved from the combination and the positive impact those synergies could have on the combined company’s valuation; (v) Devon’s “core of the core” holdings in the Delaware Basin and in the Eagle Ford Shale; (vi) Devon’s proven ability to execute on its drilling opportunities in its key positions; (vii) the support of EnCap for a transaction with Devon; (viii) the advanced stage of negotiations and due diligence with Devon and the ability to execute a merger agreement more quickly and with greater certainty; and (ix) the meaningful participation of WPX stockholders, directors and officers in the combined company. The WPX Board also discussed the potential drawbacks of a transaction with Devon, including the extent to which Devon’s acreage in the Delaware Basin and the Powder River Basin is subject to federal leaseholds and the political risk associated with such acreage. Following the WPX Board’s discussion, the WPX Board met in executive session without Messrs. Muncrief and Gaspar present.

Based on the considerations evaluated by the Board with the assistance of WPX’s management and legal and financial advisors regarding the contrasting opportunities presented by Company C and Devon, the WPX Board determined in its business judgment that continuing to pursue a strategic transaction with Devon would be in the best interests of WPX and its stockholders instead of pursuing a transaction with Company C.

Also on September 16, 2020, the Devon Board held a regularly scheduled meeting with certain members of Devon management in attendance. Representatives from J.P. Morgan and Skadden attended a portion of the meeting. Prior to the meeting, J.P. Morgan delivered a disclosure letter regarding certain relationships with Devon, WPX and EnCap. The Devon Board considered the information provided by J.P. Morgan and concluded that J.P. Morgan did not have any disqualifying conflicts of interests in serving as a financial advisor to Devon. J.P. Morgan reviewed with the Devon Board the strategic landscape in the upstream sector and discussed certain potential strategic partners for a business combination (which included WPX) and certain financial metrics calculated on a pro forma basis and other considerations for a combination with each such partner (including WPX). Management reviewed the results of its due diligence evaluation to date. Devon management also reviewed with the Devon Board various governance issues under discussion with WPX. The Devon Board

 

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indicated that it was supportive of Mr. Hager and the Devon management team continuing to pursue a merger-of-equals transaction with WPX on a low to no premium basis.

Also on September 16, 2020, Messrs. Hager and Muncrief discussed Devon’s ongoing due diligence and the results of their respective board meetings. The parties discussed the process to finalize due diligence and negotiation of definitive transaction documentation.

Additionally on September 16, 2020, Skadden sent a revised draft of the Merger Agreement to Kirkland. The revised draft provided, among other things, that (i) the merger would be structured as a tax free reorganization, but deleted the proposed closing condition that the parties obtain an opinion to such effect, (ii) the termination fee payable by either party would equal 4% of WPX’s equity value implied by the transaction and (iii) any expense reimbursement payment would not be credited against any termination fee. The revised draft also reinserted the force the vote provision, and deleted the provision permitting a party to terminate the Merger Agreement to enter into a definitive agreement with respect to a superior proposal, provided that the termination fee payable by either party would equal 4% of WPX’s equity value implied by the transaction, and provided that any expense reimbursement payment would not be credited against any termination fee.

On September 17, 2020, Vinson & Elkins provided Skadden with a revised draft of the EnCap Support Agreement proposing, among other changes, the addition of an adverse recommendation change by the WPX Board as an automatic termination event under the EnCap Support Agreement.

On September 21, 2020, Mr. Hager, Mr. Ritenour, David Harris, Devon’s executive vice president of exploration and production, and Scott Coody, Devon’s vice president of investor relations, attended a meeting with Mr. Muncrief, Mr. Gaspar and other members of WPX management. The parties reviewed and discussed draft investor relation materials relating to the announcement of a transaction. Mr. Hager separately discussed with Mr. Muncrief the executive organization structure of the combined company.

Also on September 21, 2020, Skadden delivered to Kirkland and Vinson & Elkins initial drafts of a stockholders’ agreement and a registration rights agreement, each to be entered into between Devon and EnCap at the closing of the merger to replace the existing agreements between EnCap and WPX. The draft of the stockholders’ agreement included, among other provisions, (i) a director nomination right in favor of EnCap with respect to the appointment or election of one member of the board of directors of the combined company, (ii) a standstill provision, (iii) certain voting agreements relating to the combined company and (iv) a 180-day lock up relating to the shares of Devon Common Stock to be received by EnCap in the Potential Transaction. Skadden also provided a revised draft of the EnCap Support Agreement rejecting the inclusion of an adverse recommendation change by the WPX Board as an automatic termination event.

In the weeks leading up to the execution of the Merger Agreement, the parties and EnCap focused their efforts on resolving the remaining legal and commercial issues, including thorough and extensive internal and external discussions and calls. These issues included, among others, the combined company’s management team and board composition, the inclusion of a force the vote provision in light of the termination events under the EnCap Support Agreement and the termination fees payable by each of WPX and Devon under certain circumstances. Between September 22 and 24, Messrs. Hager and Muncrief agreed upon the composition, roles and responsibilities of the senior leadership team.

Also on September 23, 2020, Kirkland sent a revised draft Merger Agreement to Skadden that, among other things, reinserted the tax opinion condition, deleted the force the vote provision, reinserted the provision permitting a party to terminate the Merger Agreement under certain circumstances to enter into a definitive agreement with respect to a superior proposal (subject to payment of the termination fee), provided that any termination fee payable by WPX would equal 3% of WPX’s equity value and any termination fee payable by Devon would equal 3% of Devon’s equity value, and provided that any expense reimbursement payment would be credited against any termination fee.

 

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On September 24, 2020, the Reserves Committee of the Devon Board held a special meeting with certain members of Devon management in attendance. During the meeting, Devon management reviewed its due diligence evaluation with respect to WPX’s oil and gas reserves.

On September 24, 2020, the legal advisors of each of WPX and Devon held a call to discuss open legal issues in the draft Merger Agreement, as a result of which Kirkland and Skadden were able to resolve a number of outstanding legal issues relating to the scope of the representations and warranties and interim operating covenants.

On September 25, 2020, the WPX Board held a virtual meeting to discuss the Potential Transaction. Members of WPX’s management, as well as representatives of Kirkland and Citi were also present. Citi provided the WPX Board with Citi’s preliminary financial analyses with respect to the Potential Transaction based on WPX management’s finalized forecasts for WPX and Devon. Following such discussions, the WPX Board met in executive session, a portion of which was without Messrs. Muncrief and Gaspar and Kirkland present.

Also on September 25, 2020, the Devon Board held a special meeting to consider the Potential Transaction. Certain members of Devon management and representatives of J.P. Morgan and Skadden were in attendance. Devon management reviewed the results of its due diligence evaluation of WPX. Representatives of J.P. Morgan reviewed J.P. Morgan’s preliminary financial analyses of the Potential Transaction. Representatives of Skadden reviewed the terms of the latest draft of the Merger Agreement and the terms of the EnCap Support Agreement, stockholders’ agreement and registration rights agreement with EnCap, and discussed the remaining open issues in the agreements. Following the Devon Board meeting, the Compensation Committee of the Devon Board met to review and approve the proposed compensation arrangements for the executive chairman, chief executive officer, chief operating officer and general counsel of Devon if the merger were to occur.

After the markets closed on September 25, 2020, Messrs. Hager and Muncrief discussed outstanding commercial issues relating to the Potential Transaction. Mr. Hager proposed an exchange ratio of 0.5034, which represented a 0% premium to the closing price. With respect to governance, Mr. Hager proposed a 12-member board, comprised of seven current Devon directors and five current WPX directors, and that each committee of the board be comprised of three current Devon directors and two current WPX directors. In addition, Mr. Hager proposed that the Merger Agreement include a force the vote provision for both Devon and WPX, that the termination fee payable by each party equal 4% of WPX’s equity value, that any expense reimbursement due would be in addition to any termination fee payable, and that the Merger Agreement would not include receipt of a tax opinion as a closing condition. Following extensive discussion, Messrs. Hager and Muncrief agreed to a 0.5165 exchange ratio, a reciprocal $75,000,000 termination fee (which represented approximately 3% of WPX’s equity value), with any expense reimbursement to be offset against any termination fee payable, a 12-member board as proposed by Mr. Hager and board composition as proposed by Mr. Hager, except that the governance committee would include four directors, comprised of two current Devon directors and two current WPX directors, and that there would be no tax opinion condition. In addition, Mr. Hager agreed that the lead independent director of the combined company would be a current WPX director and Mr. Muncrief agreed to the force the vote provision.

On September 25, 2020, Vinson & Elkins provided revised drafts of the stockholders’ agreement and the registration rights agreement, which, among other changes, (i) eliminated the standstill provisions of the stockholders agreement, (ii) eliminated the voting agreements relating to the combined company and (iii) provided that EnCap’s designee to the board of directors of the combined company would be entitled to serve on the governance committee of the board of directors of the combined company.

On September 26, 2020, representatives of WPX, Devon, Kirkland and Skadden had two telephonic meetings to resolve all other open issues in the draft Merger Agreement and the WPX and Devon disclosure letters.

 

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On September 26, 2020, the WPX Board held a special virtual meeting to consider the Potential Transaction. Members of WPX’s management, as well as representatives of Kirkland and Citi were also present. Members of WPX’s management team reviewed the negotiations with Devon that had occurred to date, reported that due diligence had been completed and, with the assistance of Kirkland, discussed the material terms of the Potential Transaction. The WPX Board also discussed again the expected benefits of a transaction with Devon, including, among others, the fact that the merger would: (i) create a combined company that can prioritize free cash flow and implement a dividend strategy consisting of a quarterly fixed plus variable dividend; (ii) the merger would be immediately accretive to all relevant per-share metrics and the combined company would retain a strong balance sheet and liquidity; (iii) create a combined company with operational scale and diversification; and (iv) drive annual incremental synergies of $275 million. Following this discussion, representatives of Kirkland reviewed with the WPX Board its fiduciary obligations. Also at the meeting, Citi reviewed with the WPX Board Citi’s financial analysis of the Exchange Ratio and rendered an oral opinion, confirmed by delivery of a written opinion dated September 26, 2020, to the WPX Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to holders of WPX Common Stock (other than, as applicable, Devon, Merger Sub and their respective affiliates). Following such discussions, the WPX Board met in executive session without Mr. Gaspar present and, for a portion, without Mr. Muncrief present. Kirkland was also present for a portion of the executive session.

After the executive session, and following a discussion by the WPX Board of the terms of the Potential Transaction and the information reviewed at such meeting, and upon receiving WPX management’s recommendation to approve the Potential Transaction on the terms set forth in the draft Merger Agreement, the WPX Board unanimously resolved to adopt the Merger Agreement substantially as presented and the associated actions described in the Merger Agreement.

Also on September 26, 2020, the Devon Board held a special meeting to consider the Potential Transaction. Certain members of Devon management and representatives of J.P. Morgan and Skadden were in attendance. Mr. Hager reviewed the proposed exchange ratio of 0.5165 that he and Mr. Muncrief had agreed to recommend to their respective boards and the resolution of certain other open issues. Representatives of Skadden reviewed for the Devon Board the resolution of the remaining issues in the agreements and discussed various other legal matters with the Devon Board. Representatives of J.P. Morgan delivered its oral opinion, subsequently confirmed by delivery of a written opinion dated September 26, 2020, that, as of such date and based upon and subject to the factors and assumptions set forth in J.P. Morgan’s written opinion, the exchange ratio in the proposed merger was fair, from a financial point of view, to Devon. See the section entitled “—Opinion of Devon’s Financial Advisor” for more information. Following discussions, the Devon Board unanimously approved the Merger Agreement, the merger, the other transactions contemplated by the Merger Agreement and resolved to recommend the approval by Devon’s stockholders of the Share Issuance pursuant to the Merger Agreement.

Following their respective board meetings on September 26, 2020, the parties finalized (1) the Merger Agreement, (2) the disclosure letters to the Merger Agreement, and (3) the EnCap Support Agreement, including the agreed forms of the registration rights agreement and the stockholders’ agreement with EnCap. On the evening of September 26, 2020, WPX and Devon executed the Merger Agreement, Devon and EnCap executed the EnCap Support Agreement and Messrs. Hager, Muncrief, Gaspar and Cameron executed their respective employment letters.

Prior to the open of trading on the New York Stock Exchange on the morning of September 28, 2020, WPX and Devon issued a joint press release announcing the transactions contemplated by the Merger Agreement, and Devon and WPX hosted a joint conference telephonic meeting of the investor community to explain additional details and the strategic importance of the transaction.

 

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Recommendation of the Devon Board and its Reasons for the Merger

This section summarizes the principal potential strategic and financial benefits that Devon expects to realize in the merger. For a discussion of various factors that could prevent or limit the parties from realizing some or all of these benefits, see “Risk Factors” beginning on page 33. In evaluating the merger, the Devon Board consulted with Devon’s management, as well as Devon’s legal and financial advisors, and, in reaching its conclusion, considered a variety of factors, including:

 

   

The Devon Board’s knowledge of Devon’s business, operations, financial condition, earnings and prospects and of WPX’s business, operations, financial condition, earnings and prospects, taking into account the results of Devon’s due diligence review of WPX.

 

   

The fact that merger will create one of the largest independent producers in North America with a premier multi-basin portfolio.

 

   

The fact that the combined organization will have a dominant position in the Delaware Basin with a long-term inventory (approximately 400,000 net acres in the economic core of the play).

 

   

The Devon Board’s belief that highly economic results across diversified acreage in the Delaware Basin will allow for the optimization of capital allocation.

 

   

The Devon Board’s belief that the merger presents the combined organization with the opportunity to:

 

   

create synergies of approximately $275 million in annual cost savings by the end of 2021, by capturing savings in general and administrative expenses, drilling and completion costs, operating costs and marketing synergies;

 

   

accelerate Devon’s transition to a business model that prioritizes free cash flow generation over production growth;

 

   

be accretive to financial metrics on a per share basis in the first year from the merger;

 

   

maintain a strong balance sheet and liquidity;

 

   

increase scale and diversification; and

 

   

create long-term value to stockholders.

 

   

The anticipated improvements in maintenance capital funding requirements resulting from the operational scale of the combined organization.

 

   

The Devon Board’s belief that the merger delivers on key strategic objectives that Devon has been targeting, including:

 

   

delivering top-tier operating results;

 

   

disciplined returns-driven strategy by maintaining a strong balance sheet and an advantaged capital structure; and

 

   

commitment to returning cash to stockholders through enhanced free cash flow generating capabilities.

 

   

Devon’s management team’s recommendation of the merger.

 

   

The feedback from stockholders favoring industry consolidation to create leading companies with scale at a time when: the E&P sector is struggling to compete for capital; valuations across the industry have declined for the last several years; a global pandemic and other factors are impacting pricing and demand; upholding the highest ESG standards is increasingly important to all stakeholders; and potential regulatory changes may impact the industry.

 

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The Exchange Ratio and merger consideration, including that Devon stockholders will own approximately 57% of the issued and outstanding shares of Devon following consummation of the merger (based on fully diluted shares outstanding of Devon), and the Devon Board’s evaluation of the Exchange Ratio relative to the intrinsic value of shares of Devon Common Stock over various periods and relative to its current assessment of the cost synergies and other benefits of the merger.

 

   

The fact that the Exchange Ratio is fixed and will not fluctuate in the event that the market price of WPX Common Stock increases relative to the market price of Devon Common Stock between the date of the Merger Agreement and the closing of the merger.

 

   

The likelihood that Devon and WPX will complete the merger on a timely basis based on the strong commitment on the part of both parties, including the likelihood that both parties will satisfy all conditions with respect to the consummation of the merger.

 

   

The fact that certain WPX stockholders holding, in the aggregate, approximately 27.3% of the issued and outstanding shares of WPX Common Stock entitled to vote at the WPX special meeting have entered into the EnCap Support Agreement with Devon obligating such stockholders to vote all of the shares of WPX Common Stock held by them in favor of the merger, as more fully described in the “The Merger Agreement—EnCap Support Agreement” beginning on page 147.

 

   

The fact that Devon’s and WPX’s leadership teams have long known and respected each other.

 

   

The Devon Board’s belief that Devon and WPX share similar values and operating philosophies, and this combination brings together the two companies’ common cultures to drive the continued growth and success of the business.

 

   

The fact that upon termination of the Merger Agreement in certain circumstances, WPX would be required to pay to Devon a termination fee that would help offset some of the costs of the transaction.

 

   

The fact that both companies share a commitment to Environmental, Social and Corporate Governance (ESG) leadership; employee safety; and environmental responsibility.

 

   

The governance arrangements contained in the Merger Agreement.

 

   

The terms of the Merger Agreement, taken as a whole, including the parties’ representations, warranties and covenants and the circumstances under which each party may terminate the Merger Agreement.

 

   

The requirement that Devon’s stockholders approve the Stock Issuance Proposal as a condition and in connection with the merger.

 

   

The Devon Board’s belief that the addition of the WPX nominated directors to the Board in connection with the merger will add further valuable expertise and experience and in-depth familiarity with WPX to the Devon Board, which will enhance the likelihood of realizing the strategic benefits that Devon expects to derive from the merger.

 

   

The Devon Board’s belief that the terms of the ancillary agreements to be entered into upon consummation of the merger, including the New Felix Stockholders’ Agreement, including the lock-up and the standstill provisions contained therein and the New Felix Registration Rights Agreement are reasonable.

 

   

The Devon Board’s consideration of certain other factors, including historical information concerning Devon’s and WPX’s respective businesses, financial conditions, results of operations, earnings, trading prices, management, competitive positions and prospects on a projected combined basis and the current and prospective business environment in which Devon and WPX operate, including commodity price levels and volatility, economic conditions, the competitive and regulatory environment and the likely effect of these factors on Devon.

 

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The financial analyses of J.P. Morgan, as reviewed and discussed with the Devon Board, as well as the opinion of J.P. Morgan, to the effect that, as of September 26, 2020, and based upon and subject to the assumptions, procedures, factors, qualifications, limitations and other matters set forth in J.P. Morgan’s written opinion, that the Exchange Ratio pursuant to the Merger Agreement was fair, from a financial point of view, to Devon.

The Devon Board also considered potential risks and potentially negative factors concerning the merger in connection with its deliberations of the proposed transaction, including:

 

   

The possibility that the merger may not be completed, or that completion may be unduly delayed, for reasons beyond the control of Devon and WPX, which could result in significant costs and disruption to Devon’s normal business.

 

   

The potential for diversion of management and employee attention and for increased employee attrition during the period prior to completion of the merger and the potential effect of the merger on Devon’s business and relations with customers, suppliers and regulators.

 

   

The substantial costs to be incurred in connection with the merger, including the costs of integrating the businesses of Devon and WPX and the transaction expenses arising from the merger.

 

   

The risk of not capturing all of the anticipated synergies and the risk that other anticipated benefits might not be realized.

 

   

The risk that certain members of Devon’s and WPX’s senior management might choose not to remain employed with the combined company.

 

   

The fact that the Merger Agreement includes customary restrictions on the ability of Devon to solicit offers for alternative proposals or to engage in discussions regarding such proposals, subject to exceptions, which could have the effect of discouraging such proposals from being made or pursued. The Devon Board understood that these provisions may have the effect of discouraging alternative proposals and may make it less likely that the transactions related to such proposals would be negotiated or pursued, even if potentially more favorable to the Devon stockholders than the merger.

 

   

The potential that the termination payment provisions of the Merger Agreement could have the effect of discouraging an alternative proposal for Devon.

 

   

The restrictions on the conduct of Devon’s business during the period between the signing of the Merger Agreement and completion of the merger.

The foregoing discussion of the information and factors considered by the Devon Board is not exhaustive. In view of the Devon Board’s consideration of a wide variety of factors in connection with its evaluation of the Merger Agreement and the transactions contemplated thereby, including the merger, and the complexity of these matters, the Devon Board did not consider it practical to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors that it considered in reaching its decision. The actual benefits from the merger could be different from the foregoing estimates and those differences could be material. Accordingly, there can be no assurance that any of the potential benefits described above or included in the factors considered by the Devon Board will be realized. See “ Risk Factors” beginning on page 33.

The foregoing discussion of the information and factors considered by the Devon Board is forward-looking in nature and should be read in light of the factors described in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 50.

 

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Opinion of Devon’s Financial Advisor

Pursuant to an engagement letter, dated September 22, 2020, Devon retained J.P. Morgan as its financial advisor in connection with the proposed merger.

At the meeting of the Devon Board on September 26, 2020, J.P. Morgan rendered its oral opinion to the Devon Board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the Exchange Ratio in the proposed merger was fair, from a financial point of view, to Devon. J.P. Morgan confirmed its September 26, 2020, oral opinion by delivering its written opinion, dated September 26, 2020, to the Devon Board that, as of such date, the Exchange Ratio in the proposed merger was fair, from a financial point of view, to Devon.

The full text of the written opinion of J.P. Morgan, dated September 26, 2020, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. Devon stockholders are urged to read the opinion in its entirety. J.P. Morgan’s opinion was addressed to the Devon Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the Exchange Ratio in the proposed merger and did not address any other aspect of the proposed merger. J.P. Morgan expressed no opinion as to the fairness of the Exchange Ratio in connection with the proposed merger to the holders of any class of securities, creditors or other constituencies of Devon or as to the underlying decision by Devon to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of Devon as to how such stockholder should vote with respect to the Stock Issuance Proposal or any other matter.

In connection with preparing its opinion, J.P. Morgan:

 

   

reviewed the Merger Agreement;

 

   

reviewed certain publicly available business and financial information concerning WPX and Devon and the industries in which they operate;

 

   

compared the financial and operating performance of WPX and Devon with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of WPX Common Stock and Devon Common Stock and certain publicly traded securities of such other companies;

 

   

reviewed certain internal financial analyses and forecasts prepared by the management of Devon relating to its business, as well as projections relating to WPX’s business, provided by the management of Devon;

 

   

reviewed the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the proposed merger (the “Synergies”); and

 

   

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of WPX and Devon with respect to certain aspects of the proposed merger, and the past and current business operations of WPX and Devon, the financial condition and future prospects and operations of WPX and Devon, the effects of the proposed merger on the financial condition and future prospects of Devon, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

 

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In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by WPX and Devon or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with Devon, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of WPX or Devon under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of WPX and Devon to which such analyses or forecasts relate. J.P. Morgan expresses no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the proposed merger and the other transactions contemplated by the Merger Agreement will qualify as a tax-free reorganization for United States federal income tax purposes and will be consummated as described in the Merger Agreement. J.P. Morgan assumed that the representations and warranties made by Devon and Merger Sub in the Merger Agreement and the related agreements are and will be true and correct in all respects material to J.P. Morgan’s analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Devon with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the proposed merger will be obtained without any adverse effect on WPX or Devon or on the contemplated benefits of the proposed merger.

Devon management furnished to J.P. Morgan the projections for Devon and WPX. Neither Devon nor WPX publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the proposed merger, and such projections were not prepared with a view toward public disclosure. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Devon and WPX management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion, please see “—Certain Unaudited Forecasted Financial Information.” J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, to Devon of the Exchange Ratio in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of the Exchange Ratio to the holders of any class of securities, creditors or other constituencies of Devon or as to the underlying decision by Devon to engage in the proposed merger. Furthermore, J.P. Morgan has expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed merger, or any class of such persons relative to the Exchange Ratio in the proposed merger or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which Devon Common Stock or WPX Common Stock will trade at any future time, please see “—Certain Unaudited Forecasted Financial Information.”

J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Devon or any other alternative transaction.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to the Devon Board on September 26, 2020, and in the presentation delivered to the Devon Board on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion to the Devon Board and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering

 

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the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Public Trading Multiples

Using publicly available information, J.P. Morgan compared selected financial data of WPX and Devon with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to WPX and Devon, respectively.

For WPX, the companies selected by J.P. Morgan were as follows:

 

   

Continental Resources, Inc.

 

   

Parsley Energy Inc.

 

   

Devon

 

   

Marathon Oil Corporation

 

   

Cimarex Energy Co.

 

   

PDC Energy, Inc.

For Devon, the companies selected by J.P. Morgan were as follows:

 

   

Continental Resources, Inc.

 

   

Apache Corporation

 

   

Parsley Energy Inc.

 

   

Marathon Oil Corporation

 

   

WPX

 

   

Cimarex Energy Co.

 

   

Ovintiv Inc.

These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses (including assets, relative size and basin presence) that, for the purposes of J.P. Morgan’s analysis, may be considered similar to those of WPX and Devon, respectively. However, certain of these companies may have characteristics that are materially different from those of WPX and Devon. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect WPX or Devon.

Using publicly available information, J.P. Morgan calculated, for each selected company, the ratio of the company’s firm value (“FV”) to the company’s adjusted EBITDAX (calculated as earnings before interest, taxes, depreciation, amortization and exploration expense) for the years ending December 31, 2021 (the “FV/2021E Adj. EBITDAX”) and December 31, 2022 (the “FV/2022E Adj. EBITDAX”), as well as the ratio of the company’s equity value (“EV”) to the company’s operating cash flow for the years ending December 31, 2021 (“EV/2021E OCF”) and December 31, 2022 (“EV/2022E OCF”).

Based on the results of this analysis, J.P. Morgan selected multiple reference ranges of 3.75x – 5.50x, 3.25x – 4.75x, 2.00x – 3.25x and 1.75x – 2.50x for WPX’s FV/2021E Adj. EBITDAX, FV/2022E Adj. EBITDAX, EV/2021E OCF and EV/2022E OCF, respectively, and 3.75x – 5.50x, 3.25x – 4.75x, 2.00x – 3.25x and

 

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1.75x – 2.50x for Devon’s FV/2021E Adj. EBITDAX, FV/2022E Adj. EBITDAX, EV/2021E OCF and EV/2022E OCF, respectively. After applying such ranges to the projected FV for WPX and for Devon for the years ending December 31, 2021 and December 31, 2022, based on the projections provided by Devon management, the analysis indicated the following ranges of implied per share equity values for shares of WPX Common Stock and Devon Common Stock, rounded to the nearest $0.25:

 

     Implied Per Share Equity Value  
             Low                      High          

WPX FV/2021E Adj. EBITDAX

   $ 2.25      $ 6.25  

WPX FV/2022E Adj. EBITDAX

   $ 3.75      $ 8.00  

WPX EV/2021E OCF

   $ 4.00      $ 6.25  

WPX EV/2022E OCF

   $ 4.75      $ 6.75  

 

     Implied Per Share Equity Value  
             Low                      High          

Devon FV/2021E Adj. EBITDAX

   $ 8.25      $ 15.25  

Devon FV/2022E Adj. EBITDAX

   $ 10.75      $ 19.00  

Devon EV/2021E OCF

   $ 7.25      $ 12.00  

Devon EV/2022E OCF

   $ 9.00      $ 12.75  

The ranges of implied per share equity value for WPX Common Stock were compared to WPX’s closing share price of $4.44 on September 25, 2020, the NYSE trading day immediately preceding the execution of the Merger Agreement, and the implied per share offer price of $4.56. The ranges of implied per share equity value for Devon Common Stock were compared to Devon’s closing share price of $8.82 on September 25, 2020, the NYSE trading day immediately preceding the execution of the Merger Agreement.

Net Asset Value Analysis

J.P. Morgan conducted an after-tax discounted cash flow, net asset valuation analysis for the purpose of determining an implied equity value per share for each of the WPX Common Stock and the Devon Common Stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future cash flows generated by the asset and taking into consideration the time value of money with respect to those future cash flows by calculating their “present value.” “Present value” refers to the current value of an asset’s cash flows and is obtained by discounting those cash flows back to the present using an appropriate discount rate and applying a discounting convention that assumes that all cash flows were generated at the midpoint of each period. A “net asset valuation” is a multi-decade life-of-field model with no terminal value assumptions.

J.P. Morgan calculated the present value, as of December 31, 2020, of the asset-level cash flows that WPX is expected to generate from December 31, 2020 onward using the forecasts provided by Devon management and assuming estimated commodity pricing through 2023, with prices held flat thereafter, as provided by Devon management (which we refer to for purposes of this section as “Devon Management Pricing”). J.P. Morgan calculated the foregoing values with and without adjusting for Devon’s estimates of the Synergies (including the costs to achieve such Synergies) based on the pro forma equity ownership of the combined company by the existing holders of Devon Common Stock. WPX’s projected asset-level cash flows were discounted to present values using a range of discount rates from 11.0% to 13.0%, which were chosen based on an analysis of the weighted average cost of capital of WPX, and then were adjusted for WPX’s general and administrative expenses, minimum volume commitment deficiency payments, additional midstream liabilities, hedges, taxes and net operating losses, to indicate a range of implied net asset values for WPX, which were divided by the number of fully diluted shares outstanding at WPX to arrive at the following range of implied net asset values per

 

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share of WPX Common Stock, both including and excluding Synergies. Resulting per share values were in all cases rounded to the nearest $0.25 per share.

 

     Implied Equity Value Per Share  
         Low             High      

WPX Implied Equity Value Per Share—Ex-Synergies

   $ 5.75     $ 7.25  

WPX Implied Equity Value Per Share—Synergized

   $ 6.75     $ 8.50  

The ranges of implied per share equity value for WPX Common Stock were compared to WPX’s closing share price of $4.44 on September 25, 2020, the NYSE trading day immediately preceding the execution of the Merger Agreement, and the implied per share offer price of $4.56.

J.P. Morgan calculated the present value, as of December 31, 2020, of the asset-level cash flows that Devon is expected to generate from December 31, 2020 onward using forecasts provided by Devon management and assuming Devon Management Pricing. J.P. Morgan calculated the foregoing values without adjusting for Devon’s estimates of the Synergies anticipated to be realized in the proposed merger. Devon’s projected asset-level cash flows were discounted to present values using a range of discount rates from 10.75% to 12.75%, which were based on an analysis of the weighted average cost of capital of Devon, and then were adjusted for Devon’s general and administrative expenses, hedges, taxes and net operating losses, to indicate a range of implied net asset values for Devon, which were divided by the number of fully diluted shares outstanding at Devon to arrive at the following range of implied net asset values per share of Devon Common Stock based on Devon Management Pricing on a stand-alone basis (i.e., without synergies). Resulting per share values were in all cases rounded to the nearest $0.25 per share.

 

     Implied Equity Value Per Share  
         Low              High      

Devon Implied Equity Value Per Share—Ex-Synergies

   $ 13.50      $ 15.75  

The ranges of implied per share equity value for Devon Common Stock were compared to Devon’s closing share price of $8.82 on September 25, 2020, the NYSE trading day immediately preceding the date of the written opinion and the execution of the Merger Agreement.

Relative Implied Exchange Ratio Analysis

J.P. Morgan compared the results for WPX to the results for Devon with respect to the public trading multiples and net asset value analyses described above.

J.P. Morgan compared the lowest equity value per share for WPX to the highest equity value per share for Devon to derive the lowest exchange ratio implied by the pair of results for each analysis performed. J.P. Morgan also compared the highest equity value per share for WPX to the lowest equity value per share for Devon to derive the highest exchange ratio implied by the pair of results for each analysis performed. The implied exchange ratios resulting from this analysis were:

 

Public Trading Analysis

   Implied Exchange Ratio  
     Low      High  

FV/2021E Adj. EBITDAX

     0.1489x        0.7472x  

FV/2022E Adj. EBITDAX

     0.1924x        0.7512x  

EV/2021E OCF

     0.3262x        0.8613x  

EV/2022E OCF

     0.3731x        0.7613x  

 

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Net Asset Value Analysis

   Implied Exchange Ratio  
     Low      High  

Implied Equity Value Per Share—Ex-Synergies

     0.3609x        0.5419x  

Implied Equity Value Per Share—Synergized

     0.4205x        0.6301x  

The implied exchange ratios were compared to the Exchange Ratio under the Merger Agreement of 0.5165x.

Value Creation Analysis

J.P. Morgan conducted an analysis of the theoretical value creation to the existing holders of Devon Common Stock that compared the estimated implied equity value of Devon Common Stock on a stand-alone basis based on the midpoint value determined in J.P. Morgan’s net asset value analysis described above to the estimated implied equity value of former Devon stockholders’ ownership in the combined company, pro forma for the proposed merger.

J.P. Morgan calculated the estimated implied equity value of former Devon stockholders’ ownership in the combined company, pro forma for the proposed merger, by (1) adding the sum of (a) the implied equity value of Devon on a stand-alone basis, using the midpoint value determined in J.P. Morgan’s net asset value analysis of Devon described above, (b) the implied equity value of WPX on a stand-alone basis, using the midpoint value determined in J.P. Morgan’s net asset value analysis of WPX described above, and (c) the estimated present value of the Synergies, as reflected in synergy estimates Devon management provided to J.P. Morgan for use in connection with its analysis, (2) subtracting the net present value of the reduction in net operating losses and (3) multiplying such result by the pro forma equity ownership of the combined company by the existing holders of Devon Common Stock of approximately 57%. This analysis indicated that the proposed merger implied pro forma equity value creation for such holders of approximately 4.1% compared to the stand-alone equity value of Devon. There can be no assurance, however, that the Synergies, net operating losses and other impacts referred to above will not be substantially greater or less than those estimated by Devon management and described above.

Miscellaneous

The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Devon or WPX. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to WPX or Devon. However, the companies selected were selected, among other reasons, because they are publicly traded companies with

 

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operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of WPX and Devon. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to WPX or Devon.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. J.P. Morgan was selected to advise Devon with respect to the proposed merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with WPX, Devon and the industries in which they operate.

Devon has agreed to pay J.P. Morgan an estimated fee of approximately $20 million, $3.0 million of which was paid to J.P. Morgan following the delivery of its opinion and the remainder of which is contingent and payable upon the consummation of the proposed merger. In addition, Devon has agreed, subject to certain limitations, to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.

During the two years preceding the date of this letter, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Devon and WPX for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger and bookrunner on Devon’s credit facility which closed in October 2018, financial advisor to Devon in connection with its disposition of a business which closed in June 2019, joint lead arranger and bookrunner on offerings of debt securities of WPX which closed in September 2019, January 2020 and June 2020, respectively, and in various roles for certain affiliates of EnCap Investments L.P., a material stockholder of WPX (the “Stockholder”), unrelated to the proposed merger. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of certain affiliates of the Stockholder, for which it receives customary compensation or other financial benefits. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of Devon and WPX. During the two year period preceding delivery of its opinion, the aggregate fees recognized by J.P. Morgan from Devon were approximately $10 million and from WPX were approximately $3.9 million. In the ordinary course of its businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Devon or WPX for its own account or for the accounts of customers and, accordingly, J.P. Morgan may at any time hold long or short positions in such securities or other financial instruments.

Recommendation of the WPX Board and its Reasons for the Merger

By unanimous vote, the WPX Board, at a meeting held on September 26, 2020, among other things, (i) determined that the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement are in the best interests of, and are advisable to, WPX and the WPX stockholders, (ii) approved and declared advisable the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement and (iii) resolved to recommend that the WPX stockholders adopt the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. The WPX Board unanimously recommends that WPX stockholders vote “FOR” the Merger Proposal.

In evaluating the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement, the WPX Board consulted with WPX’s senior management, outside legal counsel and financial advisor. The WPX Board determined that entering into the Merger Agreement with Devon provided a superior path for maximizing stockholder value reasonably available to WPX and mitigating risk, compared to pursuing

 

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an alternative transaction. In arriving at this determination and in recommending that the WPX stockholders vote their shares of WPX Common Stock in favor of adoption of the Merger Agreement, the WPX Board considered a number of factors, including the following factors (not necessarily in order of relative importance) which the WPX Board viewed as being generally positive or favorable in coming to its determination, approval and related recommendation:

 

   

Accelerates Cash-return Business Model. The WPX Board’s belief that the merger will create a combined company that can prioritize free cash flow generation over production growth, and deploy free cash flow toward higher dividends and debt reduction.

 

   

Immediately Accretive to Financial Metrics. The merger is projected to be immediately accretive to free cash flow.

 

   

Maintains Strong Balance Sheet and Liquidity. The fact that the combined company will retain a strong balance sheet, with a pro forma net debt-to-EBITDAX ratio of 1.6x on a trailing 12-month basis and a target of 1.0x over the longer term, and strong liquidity, with approximately $1.7 billion of cash and $3 billion of undrawn capacity on its credit facility expected at closing.

 

   

Credit Profile and Cost of Capital. The fact that the combined company will have an enhanced credit profile relative to WPX’s credit profile, which is expected to result in a lower cost of capital than would be realized by WPX on a standalone basis.

 

   

Exchange Ratio and Form of Merger Consideration. The value offered by the exchange ratio of 0.5165 shares of Devon Common Stock for each share of WPX Common Stock, which represents a premium of approximately 2.6% to the closing price of WPX Common Stock on September 25, 2020, the last trading day before the public announcement of the merger and a premium of approximately 5.5% to the 10-day volume weighted average trading price of WPX Common Stock immediately prior to the execution of the Merger Agreement. Additionally, the fact that the all-stock merger consideration will allow WPX stockholders to potentially benefit from longer-term economic appreciation and participate in any energy market recovery.

 

   

Increases Scale and Diversification. The fact that the combined company will be one of the largest unconventional oil producers in the U.S. and the WPX Board’s belief that the combined company will benefit from a premier multi-basin portfolio, headlined by the world-class 400,000 net acreage position in the Delaware Basin, which will account for nearly 60% of the combined company’s total oil production.

 

   

Drives Significant Cost Synergies. The expectation that the merger will result in operational efficiencies, general and administrative savings and reduced financing expense that will drive synergies of approximately $275 million in annual cost savings by the end of 2021.

 

   

Supports Implementation of a “Fixed Plus Variable” Dividend Strategy. The WPX Board’s expectation that the combined company will initiate a new dividend strategy that pays a fixed dividend of $0.11 and a variable dividend of up to 50% of the remaining free cash flow on a quarterly basis. For additional information regarding the “fixed plus variable” dividend strategy, please see “The Merger—Dividend Policy.”

 

   

Combines Complementary Cultures with a Commitment to ESG. The WPX Board’s belief that Devon and WPX share similar corporate cultures and values, including a commitment to ESG leadership, employee safety and environmental responsibility.

 

   

Meaningful Participation in the Combined Company. The WPX Board considered that the strategic combination with Devon would allow the WPX stockholders to have a meaningful ownership interest in the combined company, with an expected pro forma ownership of approximately 43%, and allow certain WPX officers and directors to have a continuing influence on the execution of the strategy and business plan of the combined company through the appointment of five current WPX directors to the Devon Board following closing and of Messrs. Muncrief, Gaspar and Cameron as chief executive officer, chief operating officer and general counsel of the combined company, respectively.

 

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Alternative Combination Transactions. The WPX Board considered, with the assistance of WPX’s management and advisors, the potential for and benefits of alternative transactions, including the sale of WPX to Company C based on its preliminary, non-binding indication of interest, and believed that it was unlikely that an alternative transaction would provide more long-term value to the WPX stockholders than the merger.

 

   

Opportunity to Receive Alternative Acquisition Proposals. The WPX Board considered the terms of the Merger Agreement related to WPX’s ability to respond to unsolicited acquisition proposals and determined that third parties would be unlikely to be deterred from making a competing proposal by the provisions of the Merger Agreement, including because the WPX Board may, under certain circumstances, furnish information or enter into discussions in connection with an acquisition proposal if necessary to comply with their fiduciary duties. In this regard, the WPX Board considered that:

 

   

subject to its compliance with the Merger Agreement and prior to the adoption of the Merger Agreement by the WPX stockholders, the WPX Board can change its recommendation to the WPX stockholders with respect to the adoption of the Merger Agreement if, among other things, it determines that such proposal constitutes or could reasonably be expected to lead to a superior proposal with respect to WPX;

 

   

while the Merger Agreement contains a termination fee of $75 million that WPX would be required to pay to Devon in certain circumstances, the WPX Board believed that this fee is reasonable in light of such circumstances and the overall terms of the Merger Agreement, consistent with fees in comparable transactions, and not preclusive of other offers. For further discussion regarding the circumstances in which WPX would be required to pay the termination fee to Devon, please see “The Merger Agreement—Termination Fee” beginning on page 145; and

 

   

if the Merger Agreement is terminated by either party because Devon stockholders do not approve the Stock Issuance Proposal, then Devon has agreed to reimburse WPX for its costs, fees and expenses incurred in connection with the transactions contemplated by the Merger Agreement up to a maximum of $20 million, as further described in the section entitled “The Merger Agreement—Expenses in connection with a Termination.”

 

   

Stockholder Support. The WPX Board considered the support of the merger by EnCap, as evidenced by EnCap’s execution of the EnCap Support Agreement, and that EnCap is receiving the same per-share consideration in the merger as all other WPX stockholders generally and is not receiving, in connection with the merger, any other consideration or benefit not received by all other WPX stockholders generally.

 

   

Tax Considerations. The WPX Board considered that the merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes with the result that U.S. holders of shares of WPX Common Stock generally will not recognize any gain or loss for U.S. federal income tax purposes upon receipt of any portion of the merger consideration delivered in the form of Devon Common Stock.

 

   

Opinion of WPX’s Financial Advisor. The WPX Board considered the financial presentation and opinion of Citi, dated September 26, 2020, to the WPX Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Exchange Ratio provided for pursuant to the Merger Agreement, which opinion was based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi as more fully described below under the heading “—Opinion of WPX’s Financial Advisor.”

 

   

Terms of the Merger Agreement; Likelihood of Completion. The WPX Board reviewed, in consultation with WPX’s legal advisors, and considered that the terms of the Merger Agreement, taken as a whole, including the parties’ representations, warranties and covenants and the circumstances under which the Merger Agreement may be terminated, in its belief, are reasonable. The WPX Board also reviewed and considered the conditions to the completion of the merger, including customary regulatory approvals.

 

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The WPX Board also considered and balanced against the potentially positive factors a number of uncertainties, risks and factors it deemed generally negative or unfavorable in making its determination, approval and related recommendation, including the following (not necessarily in order of relative importance):

 

   

Merger Consideration. The WPX Board considered that, because the merger consideration is based on a fixed exchange ratio rather than a fixed value, WPX stockholders bear the risk of a decrease in the trading price of Devon Common Stock during the pendency of the merger and the fact that the Merger Agreement does not provide WPX with a value-based termination right or an adjustment to the consideration received. Further, as the merger consideration consists of Devon Common Stock, the value of such consideration is subject to certain risks related to the business and financial condition of Devon, as more fully described in the section entitled “Risk Factors—Risks Relating to Devon and WPX” beginning on page 39.

 

   

Interim Operating Covenants. The WPX Board considered the restrictions on the conduct of WPX’s and its subsidiaries’ businesses during the period between the execution of the Merger Agreement and the completion of the merger as set forth in the Merger Agreement, including that WPX must conduct its business only in the ordinary course, subject to specific limitations, which could negatively impact WPX’s ability to pursue certain business opportunities or strategic transactions.

 

   

Risks Associated with the Timing and Pendency of the Merger. The WPX Board considered the risks and contingencies relating to the announcement and pendency of the merger and the amount of time that may be required to consummate the merger (including the likelihood of litigation or other opposition brought by or on behalf of WPX stockholders or Devon stockholders challenging the merger and the other transactions contemplated by the Merger Agreement, and the fact that the completion of the merger depends on factors outside of WPX’s or Devon’s control) and the risks and costs to WPX if the completion of the merger is not accomplished in a timely manner or if the merger does not close at all, either of which could have an adverse impact on WPX, including potential employee attrition, the impact on WPX’s relationships with third parties and the effect termination of the Merger Agreement may have on the trading price and volumes of WPX Common Stock and WPX’s operating results.

 

   

Possible Failure to Achieve Synergies. The WPX Board considered the potential challenges and difficulties in integrating the business, operations and workforce of WPX into those of Devon and the risk that anticipated cost synergies and operational efficiencies between the two companies, or other anticipated benefits of the merger, might not be realized or might take longer to realize than expected.

 

   

Competing Proposals; Termination Fees. The WPX Board considered the terms of the Merger Agreement relating to the no-shop covenants and termination fees, and the potential that such provisions might deter alternative bidders that might have been willing to submit a superior proposal to WPX. The WPX Board also considered that, under specified circumstances, WPX may be required to pay a termination fee in the event the Merger Agreement is terminated and the effect this could have on WPX, including:

 

   

the possibility that the termination fee could discourage other potential parties from making an Acquisition Proposal, although the WPX Board believed that the termination fee was reasonable in amount and would not unduly deter any other party that might be interested in making an Acquisition Proposal; and

 

   

if the merger is not consummated, WPX will pay its own expenses incident to preparing for and entering into and carrying out its obligations under the Merger Agreement and the transactions contemplated thereby.

 

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The WPX Board also considered that the Devon Board could, under certain circumstances, consider alternative proposals and change its recommendation to its stockholders.

 

   

Stockholder Approval. The WPX Board considered that, because the Merger Proposal can be approved by the affirmative vote of a majority of the outstanding shares of WPX Common Stock entitled to vote on the Merger Proposal, and EnCap owns approximately 27% of the outstanding WPX Common Stock and has entered into the EnCap Support Agreement to vote in favor of the Merger Proposal, the Merger Proposal could be approved by the affirmative vote of WPX stockholders representing approximately 32% of the remaining outstanding WPX Common Stock. Additionally, the WPX Board considered that, in the event that the WPX Board changes its recommendation to its stockholders to adopt the Merger Agreement, WPX is still required to hold a stockholder vote on the adoption of the Merger Agreement and EnCap would continue to be obligated to vote in favor of the Merger Proposal.

 

   

Interests of WPX’s Directors and Executive Officers. The WPX Board considered that WPX’s directors and executive officers may have interests in the merger that may be different from, or in addition to, those of the WPX stockholders. For more information about such interests, see below under the heading “—Interests of WPX’s Directors and Executive Officers in the Merger” beginning on page 92.

 

   

Merger Costs. The WPX Board considered the substantial transaction costs, including severance costs, associated with entering into the Merger Agreement and the completion of the merger, as well as the possible diversion of management and employee time and energy, potential opportunity cost and disruption of WPX’s business operations.

 

   

Litigation. The potential for litigation relating to the merger and the associated costs, burden and inconvenience involved in defending those proceedings.

 

   

Other Risks. The WPX Board considered risks of the type and nature described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 33 and 50, respectively.

The WPX Board considered all of these factors as a whole, as well as others, and, on balance, concluded that the potential benefits of the merger to WPX stockholders outweighed the risks, uncertainties, restrictions and potentially negative factors associated with the merger.

The foregoing discussion of factors considered by the WPX Board is not intended to be exhaustive, but is meant to include material factors considered by the WPX Board. The WPX Board collectively reached the conclusion to approve the Merger Agreement in light of the various factors described above and other factors that the members of the WPX Board believed were appropriate. In light of the variety of factors considered in connection with its evaluation of the merger, the WPX Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determinations and recommendations. Moreover, each member of the WPX Board applied his or her own personal business judgment to the process and may have given different weight to different factors. The WPX Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The WPX Board based its recommendation on the totality of the information available to it, including discussions with WPX’s management and outside legal and financial advisors.

It should be noted that this explanation of the reasoning of the WPX Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 50.

 

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Opinion of WPX’s Financial Advisor

WPX has engaged Citi as its financial advisor in connection with the proposed merger. In connection with Citi’s engagement, the WPX Board requested that Citi evaluate the fairness, from a financial point of view, of the Exchange Ratio provided for pursuant to the Merger Agreement. On September 26, 2020, at a meeting of the WPX Board held to evaluate the proposed merger, Citi rendered an oral opinion, confirmed by delivery of a written opinion dated September 26, 2020, to the WPX Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, the Exchange Ratio provided for pursuant to the Merger Agreement was fair, from a financial point of view, to holders of WPX Common Stock (other than, as applicable, Devon, Merger Sub and their respective affiliates).

The full text of Citi’s written opinion, dated September 26, 2020, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Citi, is attached as Annex C to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the WPX Board (in its capacity as such) in connection with its evaluation of the Exchange Ratio from a financial point of view and did not address any other terms, aspects or implications of the merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of WPX to effect or enter into the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for WPX or the effect of any other transaction which WPX might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation as to how the WPX Board or any securityholder should vote or act on any matters relating to the proposed merger or otherwise.

In arriving at its opinion, Citi:

 

   

reviewed a draft, dated September 26, 2020, of the Merger Agreement;

 

   

held discussions with certain senior officers, directors and other representatives and advisors of WPX and certain senior officers and other representatives and advisors of Devon concerning the businesses, operations and prospects of WPX and Devon;

 

   

reviewed certain publicly available and other business and financial information relating to WPX and Devon provided to or discussed with Citi by the respective managements of WPX and Devon, including certain financial forecasts, engineering and other technical estimates, future commodity price estimates and assumptions and other information and data relating to WPX and Devon provided to or discussed with Citi by the management of WPX;

 

   

reviewed certain information and data provided to or discussed with Citi by the managements of WPX and Devon relating to potential cost savings, strategic implications and financial and operational benefits (including the amount, timing and achievability thereof) anticipated by such managements to result from the merger;

 

   

reviewed the financial terms of the merger as set forth in the Merger Agreement in relation to, among other things, current and historical market prices of WPX Common Stock and Devon Common Stock, the financial condition and certain historical and projected financial and other operating data of WPX and Devon and the capitalization of WPX and Devon;

 

   

analyzed certain financial, stock market and other publicly available information relating to the businesses of certain other companies whose operations Citi considered relevant in evaluating those of WPX and Devon;

 

   

reviewed, for informational reference, certain potential pro forma financial effects of the merger relative to WPX and Devon each on a standalone basis utilizing the financial forecasts and other information and data relating to WPX and Devon and the potential cost savings, strategic implications and financial and operational benefits referred to above; and

 

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conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the managements and other representatives of WPX and Devon that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. With respect to the financial forecasts, engineering and other technical estimates, future commodity price estimates and assumptions and other information and data that Citi was directed to utilize in its analyses, Citi was advised by the management of WPX and Citi assumed, with WPX’s consent, that such financial forecasts, engineering and other technical estimates, future commodity price estimates and assumptions and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of WPX as to, and were a reasonable basis upon which to evaluate, the future financial performance of WPX and Devon, the potential pro forma financial effects of the merger and the other matters covered thereby. Citi also was advised by the managements of WPX and Devon and Citi assumed, with WPX’s consent, that the potential cost savings, strategic implications and financial and operational benefits anticipated by such managements to result from the merger (including the amount, timing and achievability thereof) that Citi was directed to utilize in its analyses were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of WPX and Devon as to, and were a reasonable basis upon which to evaluate, such potential cost savings, strategic implications and financial and operational benefits. Citi expressed no view or opinion as to any financial forecasts and other information or data (or underlying assumptions on which any such financial forecasts and other information or data were based) provided to or otherwise reviewed by or discussed with Citi and Citi assumed, with WPX’s consent, that the financial results, including with respect to the potential cost savings, strategic implications and financial and operational benefits anticipated to result from the merger, reflected in such financial forecasts and other information and data would be realized in the amounts and at the times projected.

Citi relied, at WPX’s direction, upon the assessments of the management of WPX as to, among other things, (i) the oil, natural gas and natural gas liquids reserves, geological and technical reservoir characteristics, undeveloped well inventory, drilling and well development, gathering and transportation, and other exploration, development and production activities, of WPX and Devon, and related costs and expenditures and capital funding requirements, (ii) the potential impact on WPX and Devon of macroeconomic, geopolitical, market, competitive, seasonal, cyclical and other conditions, trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the oil, natural gas and natural gas liquids industry, including with respect to the geographical regions and basins in which WPX and Devon operate, environmental regulations and commodity pricing and supply and demand for oil, natural gas and natural gas liquids, which are subject to significant volatility and which, if different than as assumed, could have a material impact on Citi’s analyses or opinion, (iii) WPX’s and Devon’s respective existing and future agreements and other arrangements involving, and ability to attract, retain and/or replace, key employees, customers, service providers, derivatives counterparties and other commercial relationships and (iv) the ability to integrate the businesses and operations of WPX and Devon. Citi assumed, with WPX’s consent, that there would be no developments with respect to any such matters that would have an adverse effect on WPX, Devon or the merger (including the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Citi’s analyses or opinion.

Citi did not make and, except for certain reserve reports relating to WPX and Devon, Citi was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent, accrued, derivative, off-balance sheet or otherwise) of WPX, Devon or any other entity and Citi did not make any physical inspection of the properties or assets of WPX, Devon or any other entity. Citi expressed no view or opinion as to reserve quantities, or the exploration, development or production (including, without limitation, as to the feasibility or timing thereof and associated expenditures), of any properties of WPX, Devon or any other entity. Citi did not

 

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evaluate the solvency or fair value of WPX, Devon or any other entity under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Citi expressed no view or opinion as to the potential impact on WPX, Devon or any other entity of any actual or potential litigation, claims or governmental, regulatory or other proceedings, enforcement actions, consent or other orders or investigations. Citi was not requested to, and Citi did not, participate in the negotiation or structuring of the merger nor was Citi requested to, and Citi did not, solicit third party indications of interest in the acquisition of all or a part of WPX.

Citi assumed, with WPX’s consent, that the merger would be consummated in accordance with its terms and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the merger or otherwise, no delay, limitation, restriction, condition or other action, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on WPX, Devon or the merger (including the contemplated benefits thereof) or that otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi also assumed, with WPX’s consent, that the merger would qualify as a reorganization within the meaning of Section 368(a) of the Code for U.S. federal income tax purposes. Representatives of WPX advised Citi, and Citi further assumed, that the final terms of the Merger Agreement would not vary materially from those set forth in the draft reviewed by Citi. Citi’s opinion, as set forth therein, relates to the relative values of WPX and Devon. Citi did not express any view or opinion as to the actual value of Devon Common Stock when issued as contemplated in the merger or the prices at which WPX Common Stock, Devon Common Stock or any other securities would trade or otherwise be transferable at any time, including following the announcement or consummation of the merger. Citi also did not express any view or opinion with respect to accounting, tax, regulatory, legal or similar matters, including, without limitation, as to tax or other consequences of the merger or otherwise or changes in, or the impact of, accounting standards or tax and other laws, regulations and governmental and legislative policies affecting WPX, Devon or the merger (including the contemplated benefits thereof), and Citi relied, with WPX’s consent, upon the assessments of representatives of WPX as to such matters.

Citi’s opinion addressed only the fairness, from a financial point of view and as of the date of such opinion, of the Exchange Ratio (to the extent expressly specified therein), without regard to individual circumstances of specific holders (whether by virtue of control, voting, liquidity, contractual arrangements or otherwise) which may distinguish such holders or the securities of WPX held by such holders, and Citi’s opinion did not in any way address proportionate allocation or relative fairness. Citi’s opinion did not address any other terms, aspects or implications of the merger, including, without limitation, the form or structure of the merger or any terms, aspects or implications of any support agreement, stockholders’ agreement, governance matters or other agreement, arrangement or understanding to be entered into in connection with or contemplated by the merger or otherwise. Citi expressed no view as to, and Citi’s opinion did not address, the underlying business decision of WPX to effect or enter into the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for WPX or the effect of any other transaction which WPX might engage in or consider. Citi also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation or other consideration to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the Exchange Ratio or otherwise. Citi’s opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Although subsequent developments may affect its opinion, Citi has no obligation to update, revise or reaffirm its opinion. As the WPX Board was aware, the credit, financial and stock markets, the industry in which WPX and Devon operate and the respective securities of WPX and Devon have experienced and may continue to experience volatility and Citi expressed no view or opinion as to any potential effects of such volatility on WPX, Devon or the merger (including the contemplated benefits thereof). The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

 

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In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary of the analyses below is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that the analyses must be considered as a whole and in context and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of WPX and Devon. No company or business reviewed is identical or directly comparable to WPX or Devon and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies or businesses reviewed or the results from any particular analysis.

The estimates contained in Citi’s analyses and the ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the merger. The type and amount of consideration payable in the merger were determined through negotiations between WPX and Devon and the decision of WPX to enter into the Merger Agreement was solely that of the WPX Board. Citi’s opinion was only one of many factors considered by the WPX Board in its evaluation of the merger and should not be viewed as determinative of the views of the WPX Board or management of WPX with respect to the merger or the Exchange Ratio.

Financial Analyses

The summary of the financial analyses described below under this heading “—Financial Analyses” is a summary of the material financial analyses reviewed with the WPX Board and performed by Citi in connection with Citi’s opinion, dated September 26, 2020. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Future results may be different from those described and such differences may be material. For purposes of the financial analyses described below, (i) the term “adjusted EBITDA” refers to earnings before interest, taxes, depreciation (and/or depletion) and amortization, adjusted for exploration expense and, as applicable, certain non-recurring, non-cash and other items and (ii) the term “CFPS” refers to cash flow per share. Approximate implied per share equity value reference

 

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ranges derived from the financial analyses described below were rounded to the nearest $0.05. Except as otherwise noted, financial data utilized for WPX and Devon in the financial analyses described below were based on certain financial forecasts and other information and data relating to WPX and Devon provided to or discussed with Citi by the management of WPX, referred to in this section as the “WPX forecasts” and the “WPX-Devon forecasts,” respectively.

In calculating implied exchange ratio reference ranges as reflected in the financial analyses described below, Citi divided the low-ends (or high-ends, as the case may be) of the approximate implied per share equity value reference ranges derived for WPX from such analyses by the high-ends (or low-ends, as the case may be) of the approximate implied per share equity value reference ranges derived for Devon from such analyses in order to calculate the low-ends (or high-ends) of the implied exchange ratio reference ranges.

Selected Public Companies Analyses. Citi performed separate selected public companies analyses of WPX and Devon in which Citi reviewed certain financial and stock market information relating to WPX, Devon and the selected publicly traded companies listed below.

WPX. In its selected public companies analysis of WPX, Citi reviewed certain financial and stock market information relating to WPX and the following ten selected publicly traded oil and gas exploration and production companies with operations in the same or similar basins in which WPX operates, including core oil production operations in the Permian Basin, that Citi considered generally relevant for purposes of analysis, collectively referred to as the “WPX selected companies:”

 

   

Cimarex Energy Co.

 

   

Concho Resources Inc.

 

   

Continental Resources, Inc.

 

   

Devon

 

   

Diamondback Energy, Inc.

 

   

EOG Resources, Inc.

 

   

Marathon Oil Corporation

 

   

Ovintiv Inc.

 

   

Parsley Energy, Inc.

 

   

Pioneer Natural Resources Company

Citi reviewed, among other information, enterprise values, calculated as implied equity values based on closing stock prices on September 25, 2020 plus total debt and non-controlling interests (as applicable) and less cash, cash equivalents and investments in unconsolidated affiliates, as a multiple of calendar year 2021 and calendar year 2022 estimated adjusted EBITDA and closing stock prices (as of September 25, 2020) as a multiple of calendar year 2021 and calendar year 2022 estimated CFPS. Financial data of the WPX selected companies were based on publicly available Wall Street research analysts’ estimates (or, in the case of Devon, the WPX-Devon forecasts), public filings and other publicly available information. Financial data of WPX was based on the WPX forecasts, public filings and other publicly available information.

The overall low to high, mean and median and 25th and 75th percentiles of calendar years 2021 and 2022 estimated adjusted EBITDA multiples and calendar years 2021 and 2022 estimated CFPS multiples observed for the WPX selected companies were as follows:

 

   

calendar year 2021 estimated adjusted EBITDA multiples: low of 3.9x to high of 5.9x (with a mean of 4.9x and a median of 5.1x) and 25th and 75th percentiles of 4.3x and 5.3x, respectively;

 

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calendar year 2022 estimated adjusted EBITDA multiples: low of 3.3x to high of 4.7x (with a mean of 4.1x and a median of 4.3x) and 25th and 75th percentiles of 3.6x and 4.6x, respectively;

 

   

calendar year 2021 estimated CFPS multiples: low of 1.2x to high of 5.3x (with a mean of 3.0x and a median of 2.6x) and 25th and 75th percentiles of 2.4x and 4.0x, respectively; and

 

   

calendar year 2022 estimated CFPS multiples: low of 1.2x to high of 4.2x (with a mean of 2.6x and a median of 2.2x) and 25th and 75th percentiles of 2.1x and 3.3x, respectively.

Citi noted that the calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples observed for WPX were 4.1x and 3.4x, respectively, and the calendar year 2021 and calendar year 2022 estimated CFPS multiples observed for WPX were 2.0x and 1.7x, respectively, in each case based on the WPX forecasts. Citi then applied selected ranges of calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples of 4.1x to 5.3x and 3.4x to 4.6x, respectively, and calendar year 2021 and calendar year 2022 estimated CFPS multiples of 2.0x to 4.0x and 1.7x to 3.3x, respectively, to corresponding data of WPX based on the WPX forecasts. This analysis indicated a selected approximate implied equity value reference range for WPX of $4.45 to $8.10 per share.

Devon. In its selected public companies analysis of Devon, Citi reviewed certain financial and stock market information relating to Devon and the following ten selected publicly traded oil and gas exploration and production companies with operations in the same or similar basins in which Devon operates, including core oil production operations in the Permian Basin, that Citi considered generally relevant for purposes of analysis, collectively referred to as the “Devon selected companies:”

 

   

Cimarex Energy Co.

 

   

Concho Resources Inc.

 

   

Continental Resources, Inc.

 

   

Diamondback Energy, Inc.

 

   

EOG Resources, Inc.

 

   

Marathon Oil Corporation

 

   

Ovintiv Inc.

 

   

Parsley Energy, Inc. Class A

 

   

Pioneer Natural Resources Company

 

   

WPX

Citi reviewed, among other information, enterprise values, calculated as implied equity values based on closing stock prices on September 25, 2020 plus total debt and non-controlling interests (as applicable) and less cash, cash equivalents and investments in unconsolidated affiliates, as a multiple of calendar year 2021 and calendar year 2022 estimated adjusted EBITDA and closing stock prices (as of September 25, 2020) as a multiple of calendar year 2021 and calendar year 2022 estimated CFPS. Financial data of the Devon selected companies were based on publicly available Wall Street research analysts’ estimates (or, in the case of WPX, the WPX forecasts), public filings and other publicly available information. Financial data of Devon was based on the WPX-Devon forecasts, public filings and other publicly available information.

The overall low to high, mean and median and 25th and 75th percentiles of calendar years 2021 and 2022 estimated adjusted EBITDA multiples and calendar years 2021 and 2022 estimated CFPS multiples observed for the Devon selected companies were as follows:

 

   

calendar year 2021 estimated adjusted EBITDA multiples: low of 4.1x to high of 5.9x (with a mean of 4.9x and a median of 5.1x) and 25th and 75th percentiles of 4.3x and 5.3x, respectively;

 

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calendar year 2022 estimated adjusted EBITDA multiples: low of 3.4x to high of 4.7x (with a mean of 4.1x and a median of 4.3x) and 25th and 75th percentiles of 3.6x and 4.6x, respectively;

 

   

calendar year 2021 estimated CFPS multiples: low of 1.2x to high of 5.3x (with a mean of 3.0x and a median of 2.5x) and 25th and 75th percentiles of 2.2x and 4.0x, respectively; and

 

   

calendar year 2022 estimated CFPS multiples: low of 1.2x to high of 4.2x (with a mean of 2.5x and a median of 2.2x) and 25th and 75th percentiles of 1.8x and 3.3x, respectively.

Citi noted that the calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples observed for Devon were 3.9x and 3.3x, respectively, and the calendar year 2021 and calendar year 2022 estimated CFPS multiples observed for Devon were 2.5x and 2.1x, respectively, in each case based on the WPX-Devon forecasts. Citi then applied selected ranges of calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples of 3.9x to 5.3x and 3.3x to 4.6x, respectively, and calendar year 2021 and calendar year 2022 estimated CFPS multiples of 2.2x to 4.0x and 1.8x to 3.3x, respectively, to corresponding data of Devon based on the WPX-Devon forecasts. This analysis indicated a selected approximate implied equity value reference range for Devon of $8.15 to $14.05 per share.

Utilizing the selected approximate implied per share equity value reference ranges derived for WPX and Devon described above, Citi calculated the following approximate implied exchange ratio reference range, as compared to the Exchange Ratio:

 

          Implied Exchange Ratio Reference Range          

       Exchange Ratio      

0.317x – 0.994x

     0.5165x  

Discounted Cash Flow Analyses. Citi performed separate discounted cash flow analyses of WPX and Devon as described below.

WPX. Citi performed a discounted cash flow analysis of WPX by calculating the estimated present value (as of December 31, 2020) of the standalone unlevered free cash flows that WPX was forecasted to generate during the fiscal years ending December 31, 2021 through December 31, 2025 based on the WPX forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense and the utilization of WPX’s net operating loss carryforwards expected by WPX’s management during the forecast period was taken into account. Citi calculated implied terminal values for WPX by applying to WPX’s fiscal year 2025 estimated adjusted EBITDA a selected range of adjusted EBITDA multiples of 3.9x to 5.3x. The present values (as of December 31, 2020) of the cash flows and terminal values and WPX’s estimated cash taxes were then calculated using a selected range of discount rates of 7.7% to 8.5%. This analysis indicated an approximate implied equity value reference range for WPX of $7.80 to $12.10 per share.

Devon. Citi performed a discounted cash flow analysis of Devon by calculating the estimated present value (as of December 31, 2020) of the standalone unlevered free cash flows that Devon was forecasted to generate during the fiscal years ending December 31, 2021 through December 31, 2025 based on the WPX-Devon forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense and the utilization of Devon’s net operating loss carryforwards during the forecast period as estimated by WPX’s management was taken into account. Citi calculated implied terminal values for Devon by applying to Devon’s fiscal year 2025 estimated adjusted EBITDA a selected range of adjusted EBITDA multiples of 3.9x to 5.3x. The present values (as of December 31, 2020) of the cash flows and terminal values and Devon’s estimated cash taxes were then calculated using a selected range of discount rates of 7.8% to 8.8%. This analysis indicated an approximate implied equity value reference range for Devon $11.85 to $17.60 per share.

 

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Utilizing the approximate implied per share equity value reference ranges derived for WPX and Devon described above, Citi calculated the following implied exchange ratio reference range, as compared to the Exchange Ratio:

 

          Implied Exchange Ratio  Reference Range          

       Exchange Ratio      

0.443x – 1.021x

     0.5165x  

Net Asset Value Analyses. Citi performed separate net asset value analyses of WPX and Devon as described below.

WPX. In the net asset value analysis of WPX, Citi derived an implied aggregate reference range for WPX based on the WPX forecasts, public filings and other publicly available information, as applicable, from (i) the after-tax net present values (as of December 31, 2020 and using a selected range of discount rates of 7.7% to 8.5%) of (a) the unlevered, after-tax free cash flows that WPX was forecasted to generate from WPX’s proved developed producing reserves and currently undeveloped resources, (b) the projected midstream distributions of Catalyst Midstream Partners LLC to WPX during the fiscal years ending December 31, 2021 through December 31, 2025, utilizing for the terminal value a terminal adjusted EBITDA multiple of 4.1x, and (c) WPX’s estimated non-drilling and completion capital expenditures, corporate expenses and net hedge and other gains and losses and (ii) WPX’s estimated net debt as of December 31, 2020. For purposes of this analysis, stock-based compensation was treated as a cash expense and the utilization of net operating loss carryforwards expected by WPX’s management during the forecast period was taken into account. This analysis indicated an approximate implied equity value reference range for WPX of $7.60 to $8.85 per share.

Devon. In the net asset value analysis of Devon, Citi derived an implied aggregate reference range for Devon based on the WPX-Devon forecasts, public filings and other publicly available information, as applicable, from (i) the after-tax net present values (as of December 31, 2020 and using a selected range of discount rates of 7.8% to 8.8%) of (a) the unlevered, after-tax free cash flows that Devon was forecasted to generate from Devon’s proved developed producing reserves and currently undeveloped resources and (b) Devon’s estimated non-drilling and completion capital expenditures, corporate expenses and net hedge and other gains and losses and (ii) Devon’s estimated net debt as of December 31, 2020. For purposes of this analysis, stock-based compensation was treated as a cash expense and the utilization of net operating loss carryforwards expected by WPX’s management during the forecast period was taken into account. This analysis indicated an approximate implied equity value reference range for Devon of $16.45 to $18.65 per share.

Utilizing the approximate implied per share equity value reference ranges derived for WPX and Devon described above, Citi calculated the following implied exchange ratio reference range, as compared to the Exchange Ratio:

 

          Implied Exchange Ratio Reference Range          

       Exchange Ratio      

0.408x – 0.538x

     0.5165x  

Illustrative Has/Gets Analysis. Citi compared the approximate implied per share equity value reference ranges derived for WPX on a standalone basis described above under “—Selected Public Companies Analyses—WPX,” “—Discounted Cash Flow Analyses—WPX” and “—Net Asset Value Analyses—WPX” relative to illustrative approximate implied per share equity value reference ranges on a pro forma basis derived from a selected public companies analysis, discounted cash flow analysis and net asset value analysis of the combined company after taking into account potential cost savings, strategic implications and financial and operational benefits (collectively, “synergies”) anticipated by the managements of WPX and Devon to result from the merger. Citi utilized (i) in the case of such selected public companies analysis, selected ranges of calendar year 2021 and calendar year 2022 estimated adjusted EBITDA multiples of 4.0x to 5.9x and 3.4x to 4.4x, respectively, and calendar year 2021 and calendar year 2022 estimated CFPS multiples of 2.3x to 4.2x and 1.9x to 3.5x,

 

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respectively, (ii) in the case of such discounted cash flow analysis, a selected range of terminal year adjusted EBITDA multiples of 4.0x to 5.9x and a selected range of discount rates of 7.8% to 8.8% and (iii) in the case of such net asset value analysis, a selected range of discount rates of 7.8% to 8.8%. Financial data of WPX was based on the WPX forecasts and public filings. Financial data of the pro forma combined company was based on the WPX forecasts, the WPX-Devon forecasts, synergies estimates per the managements of WPX and Devon and public filings.

Citi observed that the pro forma ownership of WPX stockholders in the combined company implied by the Exchange Ratio indicated that the merger could result in approximate implied equity value reference ranges on a pro forma basis derived from the selected public companies analysis, discounted cash flow analysis and net asset value analysis described above of $4.80 to $8.55 per share, $9.25 to $14.15 per share and $9.50 to $10.60 per share, respectively (relative to $4.45 to $8.10 per share, $7.80 to $12.10 per share and $7.60 to $8.85 per share, respectively, on a standalone basis). Actual results achieved by WPX, Devon and the pro forma combined company may vary from forecasted results and variations may be material.

Certain Additional Information

Citi also observed certain additional information that was not considered part of its financial analyses with respect to its opinion but was noted for informational purposes, including the following:

 

   

historical closing prices of WPX Common Stock and Devon Common Stock during the 52-week period ended September 25, 2020, which indicated low and high closing prices of WPX Common Stock of $1.94 per share and $14.43 per share, respectively, and low and high closing prices of Devon Common Stock of $4.70 per share and $26.98 per share, respectively, and historical implied exchange ratios of WPX Common Stock and Devon Common Stock during such 52-week period based on observed closing prices of such common stock, which indicated an approximate implied exchange ratio reference range of 0.390x to 0.614x;

 

   

publicly available Wall Street research analysts’ price targets for WPX Common Stock and Devon Common Stock, which indicated an overall low to high target stock price range for WPX Common Stock of $6.00 to $12.00 per share (with a median of $9.00 per share) and an overall low to high target stock price range for Devon Common Stock of $10.00 to $33.00 per share (with a median of $15.50 per share), and the exchange ratios implied by publicly available stock price targets of Wall Street research analysts for WPX Common Stock and Devon Common Stock, which indicated an approximate implied exchange ratio reference range of 0.182x to 1.200x (or an approximate implied exchange ratio reference range of 0.333x to 1.200x when excluding the outlier stock price target for Devon of $33.00 per share);

 

   

the relative contributions of WPX and Devon based on the WPX forecasts and the WPX-Devon forecasts, respectively, and public filings to, among other things, various financial and operating metrics of the combined company for calendar years 2021 and 2022, which indicated overall relative contributions by WPX of such metrics of approximately 32.6% to 48.7% and an implied overall approximate exchange ratio reference range of 0.327x to 0.641x; and

 

   

the illustrative potential pro forma financial effect of the merger on WPX’s and Devon’s fiscal years 2021 and 2022 estimated CFPS and estimated free cash flow per share (referred to as “FCFPS”), taking into account potential synergies anticipated by the managements of WPX and Devon to result from the merger, which indicated that the merger could be (i) relative to WPX on a standalone basis, accretive to WPX’s fiscal years 2021 and 2022 estimated CFPS and estimated FCFPS based on publicly available Wall Street research analysts’ estimates and accretive to WPX’s fiscal years 2021 and 2022 estimated FCFPS, and dilutive to WPX’s fiscal years 2021 and 2022 estimated CFPS, based on the WPX forecasts and (ii) in the case of Devon, accretive to Devon’s fiscal years 2021 and 2022 estimated CFPS and estimated FCFPS based both on publicly available Wall Street research analysts’ estimates and the