Chesapeake Energy and Southwestern Energy, two of the largest natural gas producers in the United States, 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 around $24 billion, challenging rivals such as 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 reached a $60 billion deal to buy Pioneer Natural Resources, a major producer in the Permian Basin of Texas.
Oil prices have faltered: 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 projected “peak oil” for 2030, when it says oil demand will stabilize as renewable energy displaces fossil fuels.
Chesapeake, a pioneer in extracting natural gas from shale rock, played an important role in helping the United States become a net exporter of natural gas. But it has faced turbulence in recent years. It filed for bankruptcy in June 2020 with more than $20 billion in debt, largely because one of its founders, Aubrey McClendon, had expanded the company's operations too much.
Under McClendon, who helped start the company in 1989, Chesapeake drilled and extracted shale rock gas in states including Texas, Louisiana and Oklahoma, making it one of the country's top producers in the 2000s. .
But the company produced more natural gas than there was demand, sending Chesapeake into a tailspin just as the industry experienced a major contraction in the early 2010s. McClendon, who also co-owned the Oklahoma City Thunder of the National Association Basketball, resigned as the company's CEO in 2013 while under scrutiny for corruption. He was charged with conspiring to drive down prices for oil and natural gas leases in 2016 and died in a car crash the day after he was indicted.
In early 2021, Chesapeake was able to reduce its debt through the bankruptcy process and has since expanded its operations, including by acquiring Vine Energy, a rival natural gas producer, in August 2021. It also expanded its production in Haynesville. Shale region of Louisiana and East Texas.
Southwestern Energy focuses its operations in Appalachia, and nearly 90 percent of its production and about 75 percent of its reserves will come from that region in 2021, according to a Securities and Exchange Commission filing. The remainder of its reserves are concentrated in the Haynesville Shale region, offering the newly merged companies 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.
