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The 26-year old joined the club on a year long deal from Southampton last summer after a successful trial spell and has done enough to be offered an extra year having featured in all of the club's Premiership matches so far this term whilst also scoring the Wanderers consolation goal in the League Cup Final defeat to Middlesbrough in February.
Davies is the first of the out of contract players to pledge his immediate future to the club after the Trotters chose to take up the option of extending the players initial deal and manager Sam Allardyce will be hoping the other out of contract players follow the striker in commiting themselves to the club.