The world of independent oil and gas exploration and production just got a little bit tighter. Devon Energy(AMEX: DVN) is buying rival firm Ocean Energy(NYSE: OEI) for around $3.5 billion in stock. The combined company will become the largest U.S.-based business of its type, with daily production of 2.4 billion cubic feet of natural gas and 250,000 barrels of oil and natural gas liquids.

Devon will assume $1.8 billion of Ocean's debt and other obligations. The companies anticipate general and administrative cost savings of at least $50 million annually. Both boards have approved the sale, and now shareholders must do the same. It's hoped that the deal can close in the second or third quarter of this year.

Ocean stockholders aren't getting a huge premium for their shares, though. Devon's offering 0.414 shares of stock for one share of Ocean's. At Devon's Friday close of $48.23, Ocean's shares are valued at $19.97. That's only 3.6% above Ocean's Friday close of $19.27.

The combined enterprise will operate as Devon Energy, with Devon's current chairman, president, and CEO, J. Larry Nichols, retaining the chairman and CEO positions. Ocean's head, James T. Hackett, will become the new president and COO. Nine members from Devon and four from Ocean will compose the board of directors.

The deal will strengthen Devon's Gulf of Mexico presence and add assets from Angola, Equatorial Guinea, the Ivory Coast, and Nigeria.