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An Acquisition That Would Create America's Most Valuable Shale Gas Producer

Shale pioneer Chesapeake Energy has approached its peer Southwestern Energy for preliminary talks about a possible acquisition that would create America’s top shale gas producer by market value, Reuters reports, citing sources with knowledge of the matter.  

The talks are in the early stages and there are no guarantees a deal could be reached, according to Reuters’ sources.

Chesapeake Energy, which went through bankruptcy in 2020 when oil and gas prices crashed, has been solidifying in the past year its strategic focus on its gas assets in the Marcellus shale in Appalachia and in the Haynesville shale play in Louisiana while reducing its Eagle Ford position.

Southwestern Energy operates in the Appalachia shale plays and in Haynesville, too, and could offer assets complementary to Chesapeake Energy’s core areas of operations, analysts say.

Southwestern Energy is valued by the market at around $12 billion including debt, according to Reuters.

A potential tie-up between Chesapeake Energy and Southwestern Energy would create the largest natural gas-focused producer in the shale patch by market valuation, ahead of the current leader EQT Corporation.

This year the U.S. shale industry has been looking to boost scale, efficiencies, and returns to shareholders by adding additional acreage.

Just last week, ExxonMobil announced a blockbuster deal to buy Pioneer Natural Resources in an all-stock transaction valued at $59.5 billion, or $253 per share, based on ExxonMobil’s closing price on October 5, 2023. The implied total enterprise value of the transaction, including net debt, is around $64.5 billion.

Back in August, Chesapeake Energy’s president and chief executive officer Nick Dell'Osso said on the Q2 earnings call that the company is “always paying really close attention to what's available.”

“If there are good attractive assets to buy at a time when others maybe are not able to be as aggressive, that's a real strategic advantage. So, we try to hold on to that, and we can wait for those things to come to us,” Dell'Osso added.

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By Tsvetana Paraskova for Oilprice.com

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