Chesapeake Energy Corporation (NYSE:CHK) has announced a deal to buy Southwestern Energy Company for $7.4 billion in a move that will make it the largest natural gas producer in the US.
The move comes as more US energy companies merge in order to cut costs and extend their reach. In 2023, Exxon Mobil Corporation (NYSE:XOM) announced a $59.5 billion deal to buy Pioneer Natural Resources (NYSE:PXD) to transform its upstream business, while Chevron Corporation (NYSE:CVX, ETR:CHV) is acquiring Hess Corp. (NYSE:HES) in a $53 billion takeover.
In a statement, the companies said the all-stock transaction will create a premier energy company underpinned by a leading natural gas portfolio adjacent to the highest demand markets, with premium inventory and resilient free cash flow.
"This powerful combination redefines the natural gas producer, forming the first US-based independent that can truly compete on an international scale,” commented Chesapeake CEO Nick Dell’Osso.
“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 their high-quality, large-scale acreage in Appalachia and Haynesville, the companies noted the merged entity would have a current net production of approximately 7.9 billion cubic feet of natural gas equivalent per day (bcfe/d). This would make it the third-largest public global natural gas producer. Additionally, it would have more than 5,000 gross locations and 15 years of inventory.
“Together, Southwestern and Chesapeake can drive improved margins and returns from our highly complementary portfolios through enhanced scale, capital allocation flexibility, and access to premium markets to supply growing global natural gas demand,” Southwestern CEO Bill Way added.
Under the terms of the agreement, Southwestern shareholders will receive 0.0867 shares of Chesapeake for each share of Southwestern at closing, when the combined company will assume a new name.
The transaction is expected to close in the second quarter, subject to regulatory approvals.