Exclusive: Natgas producer Chesapeake explores buying Southwestern Energy -sources by David French, October 17, 2023, Reuters
Oct 17 (Reuters) – U.S. natural gas producer Chesapeake Energy Corp (CHK.O) has approached Southwestern Energy (SWN.N), a peer valued by the stock market at $12 billion including debt, about a potential acquisition, people familiar with the matter said.
Were the two companies to combine, they would overtake EQT Corp (EQT.N) as the largest natural gas-focused exploration and production company in the U.S. by market value, at a time when shale companies are seeking scale and efficiencies.
Southwestern’s shares ended trading on Tuesday up 8.3% at $7.33 on the news, at their highest finish in almost a year. Chesapeake’s shares closed up 0.7% at $89.59.
Chesapeake’s talks with Southwestern are preliminary, with no certainty the two sides will reach a deal, the sources said. Chesapeake could explore other potential acquisitions, and may end up pursuing a different target, the sources added.
The sources asked not to be identified because the matter is confidential. Chesapeake and Southwestern did not immediately respond to requests for comment.
An acquisition of Southwestern would be transformative for Chesapeake, which has been snapping up small rivals in the last two years. The two companies are neighbors; most of Southwestern’s production is in Appalachia’s shale formations and the Haynesville basin in Louisiana, where Chesapeake also operates.
The deal would also be a reversal of sorts. Southwestern acquired some of its acreage in West Virginia and Pennsylvania from Chesapeake for $5.4 billion in 2014.
In 2021, Chesapeake emerged from a bankruptcy which epitomized the boom and bust of debt-laden exploration and production companies that expanded aggressively in the shale patch. Since then, Chesapeake has been shedding oil-producing assets to focus on its competence in natural gas. It has a market value including debt of about $13 billion.
Kimmeridge Energy Management, the activist investment firm that pushed Chesapeake last year to move away from oil drilling and remains a shareholder with a 2% stake, welcomed the deal talks.
“A potential merger between Chesapeake and Southwestern aligns with our views on industry consolidation, given the high degree of operational overlap, opportunity for material synergies and valuation re-rating opportunity,” Kimmeridge managing partner Mark Viviano said in a statement.
U.S. natural gas prices have been sluggish in recent months, as oversupply and warmer weather erode producers’ profitability.
Some analysts expect prices to go up in the next few months, as a pick-up in U.S. natural gas exports creates more domestic scarcity.
Dealmaking in the energy-producing sector has been heating up as companies race to secure the most lucrative acreage. Exxon Mobil Corp (XOM.N) last week agreed to acquire Pioneer Natural Resources (PXD.N) for $60 billion in stock, placing a big bet on the Permian basin, the biggest U.S. oilfield.
Refer also to:
2021: Frac’er Chesapeake Energy Corp magically “shedding” $US 7.7 Billion in debt not good enough?
2021: Pennsylvania Supreme Court gives gas industry big victory, Rules in favour of frac royalty cheaters (Anadarko, Chesapeake), Kills Attorney General’s anti-trust lawsuit. Jackie Root: “It just seems like ruling after ruling is coming down in favor of the oil and gas companies, handing them all the cards and all the money.” There are ample reasons why politicians beholden to oil and gas appoint the judges they do – in Canada too.
2015: New Brunswick voted today to prohibit fracking
2014: How to Fight Fracking, 9 resistance strategies from the frontline standoff in New Brunswick
2013: Port Elgin New Brunswick bans fracking within village limits to protect its clean water supply
2013: Texas fracking company SWN Resources Canada Inc. sues Mi’kmaq warrior youth
2013: Shale gas is a boon for New Brunswick, Frac Pimp (Federal) Environment Minister Peter Kent says
2013: Fort Worth Sues Driller Chesapeake, Citing Millions in Lost Royalties
2013: Chesapeake sued for fixing prices, underpaying landowners
2012: How Fracking Could Ruin New Brunswick
2012: The New Brunswick government must address the “very serious concerns” that people have over fracing
2012: Nova Scotia accepting fracking waste from New Brunswick
2012: New Brunswick Government Shale Gas Session, Dr. Angela LeGresleyClip no longer available; I watched it numerous times when it was online. Astoundingly courageous statements by Dr. LeGresley.
“I made it known that I was a physician…I made my health concerns known and stood up despite being very intimidated surrounded by oil and gas industry people and politicians.” …
“If they have an abundance of peer-reviewed studies, health impact assessments, etc., all the kind of things that would reassure me, and I need more than regulations to reassure me, I need, as a physician I need more than that…if they have this kind of thing, they should be giving it to me I think. They should be responding to my letters, they should be calling me.” …
“I would just encourage them if they had that information to get a hold of me but, I know that most of the peer-reviewed information has only started in April 2011 and that’s why we need a lot more of it, we need more studies, and that’s why we cannot go forward right now. We need a moratorium. The Moncton City Hospital physicians have voted for a moratorium.” [Standing ovation] … “You probably already know that The [New Brunswick] College of Family Physicians have also voted for moratorium and I would be willing to say that there are going to be more physicians following this.” …
“Try to get answers, I’m not sure how to get them to respond….” …
“We need health impact assessments, not just environmental impact assessments, there is only one that I know of, and that was in Colorado.” …
“I think the people have spoken.” …
“It’s not just a few little wells, they need to frac a lot” …
“I will sleep well at night, knowing that I spoke up.”
2011: Chesapeake Energy Issued Record Gas Drilling Fine For Water Contamination In Pennsylvania