Chesapeake, Southwestern deal announced
11 January 2024
Combined firms would be one of the largest U.S. natural gas producers
Chesapeake Energy said it will merger with smaller rival Southwestern Energy in an all-stock transaction valued at US$7.4 billion.
The new firm—which will operate under a new name—would be one of the largest U.S. natural gas producers. The announcement is another in a series of recent deals in the U.S. energy sector including Exxon Mobil’s US$60-billion Pioneer Natural Resources offer and Chevron’s US$53-billion agreement for Hess.
“This powerful combination redefines the natural gas producer, forming the first U.S.-based independent that can truly compete on an international scale,” said Nick Dell’Osso, Chesapeake’s president and CEO. “The union creates a deep inventory of advantaged assets adjacent to high demand markets, allowing for the application of proven operational practices and the power of an Investment Grade quality balance sheet to drive significant synergies benefiting energy consumers and shareholders alike.”
By combining high-quality, large scale acreage in Appalachia and Haynesville, the pro forma company has current net production of approximately 7.9 Bcfe/d with more than 5,000 gross locations and 15 years of inventory.
Ther merger will also save approximately US$400 million in overhead and other “synergies”.
“In order to maximize value of the combined company’s scale of production, Investment Grade quality capital structure and 100% certified Responsibly Sourced Gas, the company will build a global marketing and trading presence in Houston to supply lower-cost, lower carbon energy to meet increasing domestic and international LNG demand,” the companies said in a news release.
The combined company will maintain its commitment to achieving net zero Scope 1 and 2 GHG emissions by 2035, transparent disclosure on measurable targets, investment in low-carbon solutions, and social and governance excellence.
“The world is short energy and demand for our products is growing, both in the U.S. and overseas,” Dell’Osso said.” We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fueling a more affordable, reliable, and lower carbon future. I look forward to leading the talented workforce of the combined organization to accelerate the long-term value opportunity for our shareholders, employees, and all stakeholders.”
Following the merger, the board of directors of the combined company will increase to 11 members and will initially be comprised of seven representatives from Chesapeake and four representatives from Southwestern. Mike Wichterich will serve as non-executive chairman and Nick Dell’Osso as president and CEO of the combined company. The combined company will be headquartered in Oklahoma City while maintaining a material presence in Houston and will assume a new name upon closing.