US midsized energy company Chesapeake Energy agreed to acquire peer Southwestern Energy for $7.4 billion, establishing a giant in natural gas production, the companies announced Thursday.
Under the all-stock transaction, the combined company expects to achieve economies of scale in drilling and boast an investment-grade balance sheet.
“This powerful combination redefines the natural gas producer, forming the first US based independent that can truly compete on an international scale,” said Chesapeake Chief Executive Nick Dell’Osso.
“We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fueling a more affordable, reliable, and lower carbon future.”
The combined company will have natural gas output of about 7.9 billion cubic feet per day, putting it at or near the top of all US natural gas producers.
Under the terms of the deal, Southwestern shareholders will receive about 0.9 shares of Chesapeake stock for each share of Southwestern.
Chesapeake shareholders will own about 60 percent of the venture, with Southwestern investors holding the balance.
The combined company will be based in Chesapeake’s home town of Oklahoma City, Oklahoma, with a “material” presence in Houston, according to the joint press release.
The venture will have a new name when the deal closes, targeted for the second quarter of 2024.
The transaction comes on the heels of other major petroleum mergers, including ExxonMobil’s proposed acquisition of Pioneer Natural Resources for about $60 billion.
Shares of Southwestern were down 2.2 percent early Thursday, while Chesapeake rose 3.3 percent.
