Handover Process Expected to Be Completed in the Second Quarter
Large-scale mergers and acquisitions (M&A) continue to make headlines in the U.S. energy industry as the new year begins. The merger of Chesapeake Energy and Southwestern Energy will create the largest natural gas company in the U.S.
On the 11th (local time), Chesapeake announced that it had agreed to acquire Southwestern for a total of $7.4 billion. This equates to a purchase price of $6.69 per share, about 3% below Southwestern’s recent closing price. Southwestern shareholders will receive 0.086 shares of Chesapeake stock for each share they hold. The acquisition process is expected to be completed in the second quarter.
Nick DeIulio, CEO of Chesapeake, described the deal as a "powerful merger that redefines natural gas companies," adding that it will enable them to "compete on a truly global scale." Through this acquisition, Chesapeake will expand production in the Appalachian shale formations and the Haynesville Basin in Louisiana. The merged company’s daily natural gas production is expected to surpass that of competitor EQT, making it the largest in the U.S.
This merger is seen as an attempt to expand market dominance within the industry amid accelerating energy transitions worldwide, as countries implement climate change policies to reduce fossil fuel use. Founded in 1989 by Aubrey McClendon, who led the U.S. shale boom, Chesapeake faced difficulties due to deteriorating financial conditions and even entered bankruptcy proceedings shortly after the pandemic but has since restructured its business to focus on natural gas.
Recently, large-scale M&As have been ongoing in the U.S. energy sector. ExxonMobil announced in October last year that it would acquire Pioneer Natural Resources for about $60 billion. Chevron also agreed to acquire Hess, a shale oil company in the Permian Basin, for $53 billion.
Meanwhile, on the New York Stock Exchange this afternoon, Chesapeake’s stock is trading above $79 per share, up more than 2% from the previous close. Southwestern’s stock is trading near $6.69 per share, down nearly 3%.
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