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Quick Read
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Devon Energy (DVN) generated $3.1B in free cash flow for 2025 and signed two long-term gas marketing agreements totaling 115 MMcf/d of supply starting in 2028, positioning itself for a structural natural gas shortage driven by AI data centers and global LNG exports. Coterra Energy (CTRA) is merging with Devon in an all-stock deal targeting $1B in annual pre-tax synergies and a 31% dividend increase after closing.
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Structural demand for natural gas is tightening from AI data center power requirements and new LNG export capacity coming online globally, while Henry Hub prices spiked to $13.80 per MMBtu in January 2026 before pulling back, signaling a market with limited supply buffer.
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Jim Cramer fielded a call from a viewer named Richard in North Carolina recently, and the topic was Devon Energy (NYSE:DVN). Richard called it undervalued given its pending merger. Cramer agreed, but the more interesting part of his answer was the macro case he made underneath it.
“Great natural gas portfolio. It’s not necessarily going to be linked to the international, but there’s going to be shortage of natural gas. We all realize that now they’re doing a good merger. I hesitate to recommend any oil and gas after this big run, but if it comes in, I’m going to say yes.”
That quote does a lot of work. Cramer is threading three separate ideas: a structural natural gas shortage, Devon’s positioning within it, and a valuation call that requires patience.
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The Natural Gas Shortage Thesis
The case for tightening natural gas supply is not hard to find right now. Henry Hub prices spiked to $13.80 per MMBtu the week of January 30, 2026, the highest level in the dataset, before pulling back sharply to $2.99 as of March 6, 2026. That kind of volatility is not noise. It reflects a market that has very little buffer when demand surges.
Structural demand is also building from two directions simultaneously: AI data centers requiring around-the-clock power, and LNG export capacity coming online globally. Devon’s management clearly sees this. The company signed two gas marketing agreements in 2025 that don’t kick in until 2028: an LNG export contract for 50 MMcf/d over a 10-year term with international pricing exposure, and a supply agreement for 65 MMcf/d over seven years tied to ERCOT West pricing for a proposed 1,350 MW power plant. Devon is essentially pre-selling into the shortage Cramer is describing.
The Stock’s Run and Cramer’s Caution
Cramer’s hesitation is grounded in the numbers. DVN is up nearly 24% year-to-date and about 35% over the past year. The stock currently trades around $45, well above its 200-day moving average of $35.71. Chasing momentum in energy rarely ends well.
The underlying business, though, is in strong shape. Devon generated $3.1 billion in free cash flow for full-year 2025 and trades at roughly 10x trailing earnings. The pending all-stock merger with Coterra Energy (NYSE:CTRA) targets $1 billion in annual pre-tax synergies and a 31% dividend increase post-close.
Cramer acknowledged Devon’s strong positioning in the natural gas story, but noted the stock’s recent run gives him pause. He stopped short of an outright recommendation, saying he would revisit the stock if it pulls back from current levels.
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