Chesapeake just bought SWN. Merger to close soon. From WSJ:
Southwestern Energy SWN 6.23%increase; green up pointing triangle and Chesapeake Energy CHK 0.88%increase; green up pointing triangle are close to a merger that would create a roughly $17 billion company ranking as one of the largest natural-gas producers in the U.S.
A deal could come together as soon as next week, according to people familiar with the situation, provided the talks don’t hit a last-minute snag.
Southwestern had a market capitalization of roughly $7.2 billion and Chesapeake’s was a little more than $10 billion as of Friday afternoon. Both stocks jumped in early October after Reuters reported that Chesapeake had approached Southwestern about a deal.
Chesapeake produced about 3.4 billion cubic feet of gas per day in the third quarter, while Southwestern produced 4 billion. The two producers combined would leapfrog rival EQT and likely become the largest gas producer in the U.S.
A merger would strengthen Chesapeake’s existing positions in the U.S. Northeast and Louisiana and allow it to further its strategy centered on exports of liquefied natural gas out of the Gulf Coast, where most refrigeration plants sit.
Co-founded in 1989 by charismatic wildcatter Aubrey McClendon, Oklahoma City-based Chesapeake was the poster child for the fracking boom, borrowing lavishly to acquire millions of acres across Louisiana, Texas and Appalachia. But a glut of supply drove down prices in the early 2010s and the company slashed gas drilling and diversified into crude.
The company was laden with debt as it entered the pandemic’s price spiral and in 2020 filed for bankruptcy.
Chesapeake reduced its debt by more than $7 billion through the bankruptcy process and prioritized returning cash to shareholders and solidifying its existing position in the Haynesville Shale, a large gas-producing region in Louisiana and East Texas strategically located close to the Gulf Coast’s LNG export terminals.
The company sold oil assets in Texas and reoriented its production around natural gas. In 2021 it acquired Vine Energy, a Haynesville driller, for $1.1 billion and the following year bought Marcellus Shale producer Chief and associated assets for about $2.6 billion.
The company has since announced a 36-month agreement to supply 300 million cubic feet a day of gas to Golden Pass LNG, an export terminal on the Gulf Coast that is due to come online in 2025. Chesapeake has also signed preliminary agreements to supply LNG to trading houses Gunvor and Vitol.
A predecessor to Spring, Texas-based Southwestern was founded in 1929 to provide natural gas to northwest Arkansas, before expanding into Oklahoma, and eventually the Appalachian Basin. In 2021, Southwestern acquired Haynesville producers Indigo Natural Resources and GEP Haynesville in back-to-back deals collectively worth around $4 billion.
The Southwestern-Chesapeake deal would be the latest tie-up in the energy industry, as investors urge producers to scale up. In October Exxon Mobil struck a $60 billion deal for Pioneer Natural Resources, followed by Chevron’s $53 billion deal for Hess.
Occidental Petroleum in December said it would buy Permian producer CrownRock for nearly $11 billion. This past week, oil producer APA said it had agreed to buy smaller peer Callon Petroleum in a deal valued at around $2.6 billion.
Write to Laura Cooper at laura.cooper@wsj.com, Lauren Thomas at lauren.thomas@wsj.com and Benoît Morenne at benoit.morenne@wsj.com