Crescent Energy Company (CRGY Quick QuoteCRGY - Free Report) is expanding its presence in the Eagle Ford shale through an agreement to acquire assets from Devon Energy Corporation (DVN Quick QuoteDVN - Free Report) for a net purchase price of approximately $3.85 billion. The transaction strengthens CRGY’s position in one of its core operating regions, adds high-quality oil-weighted production and creates opportunities to improve operational efficiency and generate higher free cash flow. The deal also expands the company’s royalty business, giving Crescent Energy greater control over future development and cash flow generation.

Strengthening Crescent Energy’s Eagle Ford Position

The acquisition adds approximately 68,000 barrels of oil equivalent per day (boe/d) of production, nearly 40,000 barrels of oil per day and more than 600 Tier 1 net drilling locations in the Karnes Trough. The acquired assets include approximately 90,000 net acres across Karnes, DeWitt and Gonzales counties in Texas, directly adjacent to Crescent Energy’s existing operations.

Following the transaction, Crescent Energy, currently sporting a Zacks Rank #1 (Strong Buy), expects to become the second-largest operator in the Eagle Ford. The company’s existing royalty interests and long-standing operational presence in the region give it considerable familiarity with the acreage, geology and development potential. This should help streamline integration and support the application of its established operating strategy.

Operational Improvements to Drive Synergies

Crescent Energy plans to apply its proven strategy of acquiring high-quality assets and improving their performance through disciplined development and operational efficiencies. Management has identified approximately $140 million in annual synergy potential across drilling and completions (D&C), lease operating expenses (LOE) and marketing.

Development optimization represents a significant portion of the expected savings. Crescent Energy sees opportunities to increase lateral lengths, improve surface design and enhance completion efficiency, helping reduce well costs and improve capital productivity. Management expects approximately $100 million in annual synergies from longer lateral development alone.

The company anticipates capturing the full $140 million in annual synergies during 2027, with the savings reflected in its exit-year run rate. These improvements, combined with the acquired assets’ high-quality inventory, are expected to support higher margins, lower breakeven costs and stronger free cash flow generation.

Improving Capital Efficiency and Free Cash Flow

The transaction is aligned with Crescent Energy’s focus on maximizing free cash flow and investment returns rather than aggressively increasing drilling activity. Management intends to maintain activity at approximately the same level while using the larger asset base to improve capital efficiency.

Pro forma for the acquisition, Crescent Energy expects to produce approximately 400,000 boe/d, including around 170,000 barrels of oil per day. The company estimates that approximately $1.8 billion of annual development capital will support its production base, with a maintenance reinvestment rate roughly 5% lower than that of its standalone business.

The expanded portfolio is expected to provide approximately six years of inventory with breakeven costs below $50 per barrel, around 10 years below $60 per barrel and more than 15 years of total inventory life. This combination of high-quality drilling opportunities, lower capital intensity and improved margins could strengthen Crescent Energy’s ability to generate cash across commodity-price environments.

Crescent Royalties Gains Scale and Greater Visibility

The acquisition also represents a major expansion of Crescent Royalties, as the transaction includes mineral interests owned by Devon, currently carrying a Zacks Rank #3 (Hold), that overlap substantially with Crescent Energy’s existing royalty holdings. The acquired royalties are expected to contribute approximately $50 million in incremental EBITDA.

Management indicated that the royalty business could grow from approximately $200 million in annual EBITDA to around $250 million in cash flow generation. More importantly, Crescent Energy expects to increase the proportion of its royalty portfolio it operates from roughly 10% to approximately 40%, improving its visibility into drilling schedules, future development and royalty cash flows.

The expanded platform could provide Crescent Energy with additional strategic flexibility as it evaluates ways to maximize the value of its mineral interests. Management has indicated that its evaluation of the minerals portfolio remains on the same or a faster timeline than previously outlined.

Financing and Debt Reduction Remain Key Priorities

Crescent Energy expects to finance the approximately $3.85 billion net purchase price through a balanced combination of debt and equity, alongside available cash as appropriate. Long-term investor KKR has committed $500 million in support of the transaction, while Crescent Energy has also launched a public offering of common stock.

Management expects the acquisition to deliver returns exceeding its 2x multiple-on-invested-capital target, with a payback period of less than five years. However, the transaction will increase debt, making disciplined financing and post-acquisition deleveraging important priorities.

Crescent Energy intends to maintain its fixed dividend, preserve strong liquidity and direct excess free cash flow toward debt reduction. Additional commodity-price hedges are designed to support cash flow visibility during the initial deleveraging period. Based on current strip pricing, management targets leverage of approximately 1.5x by year-end 2027 and nearly 1x by year-end 2028.

The acquisition is expected to close in the fourth quarter of 2026 or early 2027, subject to customary closing conditions and required regulatory approvals.

A Strategic Expansion With Long-Term Potential

Crescent Energy’s agreement to acquire Devon’s Eagle Ford assets expands its production base, strengthens its position in a core basin and creates multiple avenues for operational and financial improvement. The expected synergies, improved capital efficiency and greater royalty operatorship could enhance free cash flow generation and support the company’s debt-reduction objectives.

While successful integration, synergy realization and financing execution remain important considerations, the transaction gives Crescent Energy an opportunity to build on its established Eagle Ford operating record. Its ability to improve the acquired assets while maintaining capital discipline will be central to realizing the deal’s anticipated long-term value.

Other Key Picks

Investors interested in the energy sector may consider some other top-ranked stocks like Drilling Tools International Corporation (DTI Quick QuoteDTI - Free Report) and Montauk Renewables, Inc. (MNTK Quick QuoteMNTK - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Drilling Tools International is a global oilfield services provider focused on supplying downhole tools used in horizontal and directional drilling. The Zacks Consensus Estimate for DTI’s 2026 revenues indicates 1.6% year-over-year growth.

Montauk Renewables is a fully integrated renewable energy company that specializes in the management, recovery and conversion of biogas into renewable energy. The Zacks Consensus Estimate for MNTK’s 2026 earnings indicates 1100% year-over-year growth.