By Shruti Sonal

(Reuters) – The latest business combination in the U.S. shale patch is signaling a path forward for the troubled sector.

In contrast to the bankruptcies of the past three months, Devon Energy <DVN.N>’s $2.56 billion all-stock, low premium deal for rival WPX Energy <WPX.N> brings together two companies with assets in a few oil-producing basins and relatively low debt levels.

Investors supported the idea with a rally in shares. WPX closed up 16.4% on Monday and Devon gained 11%, buoyed by the prospect of a combined company that analysts believe would be better positioned to pay dividends and reduce debt.

Shale has been hammered by the COVID-19 pandemic that has slashed global demand for oil and investors have shunned the sector’s poor returns.

“This deal represents the form of shale company consolidation that many across the industry have been looking for,” said Andrew Dittmar, a mergers and

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