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New $7.4 Billion Merger Will Create the Biggest U.S. Natural Gas Producer

Chesapeake Energy Corporation and Southwestern Energy have agreed to merge in an all-stock transaction valued at $7.4 billion, which will create the biggest U.S. natural gas producer by market value and production.

The all-stock deal is valued at $6.69 per share, based on Chesapeake’s closing price on January 10, 2024, Chesapeake said on Thursday. Under the terms of the agreement, Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each share of Southwestern common stock outstanding at closing.   

The combined company will assume a new name at closing, Chesapeake said.

The transaction, which is subject to customary closing conditions, including approvals by Chesapeake and Southwestern shareholders and regulatory clearances, is targeted to close in the second quarter of 2024.

With the completion of the deal, the newly created company will overtake the current U.S. leader in natural gas production, EQT Corporation.

“This powerful combination redefines the natural gas producer, forming the first U.S. based independent that can truly compete on an international scale,” Chesapeake’s president and CEO Nick Dell'Osso said today.

Reports of a Chesapeake-Southwestern merger first surfaced in the autumn of 2023 as the U.S. shale patch began a new major consolidation phase that saw U.S. supermajors Exxon and Chevron each announce large acquisitions valued at over $50 billion.   

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.

In August 2023, Chesapeake Energy’s Dell'Osso said on the Q2 earnings call that the company is “always paying really close attention to what's available.”

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“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.  

By Tsvetana Paraskova for Oilprice.com

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