Top natural gas producers announce multibillion-dollar merger
Chesapeake Energy and Southwestern Energy, two of America’s largest natural gas producers, announced plans to merge Thursday, in an all-stock deal worth $7.4 billion. The new company would become one of the largest energy producers in the United States, with a significant presence in Louisiana and Texas.
Combined, the two companies would have a market value of about $24 billion, challenging rivals like Chevron and EQT.
The deal is the latest in a series of mergers and acquisitions involving U.S. oil and natural gas companies. In October, Chevron announced plans to acquire Hess in a $53 billion deal. Two weeks earlier, Exxon Mobil closed a $60 billion deal to acquire Pioneer Natural Resources, a major producer in Texas’ Permian Basin.
Oil prices have fallen: the price of West Texas Intermediate, the US benchmark, has fallen more than 40 percent since June 2022, and prices are expected to fall further this year as global growth slows. The International Energy Agency has also predicted “peak oil levels” by 2030, when it says oil demand will stagnate as renewable energy displaces fossil fuels.
A pioneer in extracting natural gas from shale rock, Chesapeake was instrumental in helping the United States become a net exporter of natural gas. But in recent years there has been unrest. It filed for bankruptcy in June 2020 with debts of more than $20 billion, largely because one of its founders, Aubrey McClendon, overexpanded the company’s operations.
Under Mr. McClendon, who helped start the company in 1989, Chesapeake aggressively drilled and extracted gas from shale rocks in states such as Texas, Louisiana and Oklahoma, making it one of the nation’s top producers in the 2000s.
But the company produced more natural gas than demand, sending Chesapeake into a tailspin just as the industry was experiencing a major contraction in the early 2010s. Mr. McClendon, who was also part owner of the National Basketball Association’s Oklahoma City Thunder, stepped down as the company’s CEO in 2013 while under scrutiny for corruption. He was charged in 2016 with conspiring to lower oil and natural gas lease prices and died in a single-vehicle car crash the day after his indictment.
In early 2021, Chesapeake was able to reduce its debt through the bankruptcy process, and it has since expanded its operations, including through the acquisition of Vine Energy, a natural gas-producing rival, in August 2021. It also expanded its production in the Haynesville region. Shale region of Louisiana and East Texas.
Southwestern Energy is concentrating its operations in Appalachia, with nearly 90 percent of production and about 75 percent of reserves coming from that region in 2021, according to a Securities and Exchange Commission filing. The remainder of the reserves are concentrated in the Haynesville Shale region, which puts the newly merged companies in a prime position to expand their operations.
The deal must be approved by regulators and approved by the companies’ shareholders. The companies said they expected the merger to be completed by the end of June.