Toms Capital urges Devon Energy to explore strategic alternatives and potential sale

Toms Capital Management, an activist hedge fund managing over $4 billion in assets, has urged Devon Energy to explore strategic alternatives, including a potential sale of the company. In a letter to the board, Toms Capital stated it has become one of Devon’s top five shareholders, a significant increase from its position at the end of June.

The hedge fund argues that Devon’s recent merger with Coterra Energy has created an overly complex asset portfolio across the Delaware, Marcellus, Eagle Ford, and Powder River basins. Toms Capital claims this complexity results in a valuation discount of at least one EBITDA multiple point compared to industry peers. The fund suggests that a strategic buyer could acquire the entire company and subsequently divest specific assets, thereby shifting execution risks away from current Devon shareholders.

This move intensifies existing pressure on Devon Energy from other investors, such as the energy-focused firm Kimmeridge, which has also called for a streamlined property portfolio. The activist campaign is joined by litigator Alex Spiro.