Chesapeake set to become largest player in upstream US gas supply after acquiring Southwestern

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AMERICAN exploration and production company Chesapeake has agreed to buy Southwestern Energy in a US$7.4bn all-share deal. The combined firm will overtake EQT as the largest independent natural gas producer in the US by output and market value, said Reuters. 

Under the deal, Chesapeake will combine Southwestern’s shale assets in Appalachia, and its Haynesville Shale basin in Louisiana to produce around 7.9bn ft3 equivalent per day. Chesapeake has had previous dealings with Southwestern, selling the firm 413,000 acres and 435 wells in the Utica and Marcellus shale regions in northern West Virginia and Pennsylvania for US$5.4bn in 2014. 

The acquisition will see the combined company assume a new name at the close of the deal, ending the almost 35-year brand name of Chesapeake. Long associated with natural gas production, the firm diversified into oil in the early 2010s when natural gas prices fell. It declared bankruptcy in 2020, emerging in 2021 with close to US$8bn less debt, and has since been buying up smaller rivals in a bid to regain its former status. 

The deal is expected to close in the second quarter, pending approval from regulators and shareholders. Under the terms of the agreement, the combined company would have an enterprise value of approximately US$24bn. Chesapeake shareholders will own around 60% of the new company, with Southwestern investors owning the rest.  

Chesapeake said the new company will build a global marketing and trading presence in Houston to supply lower cost, lower carbon energy to meet increasing domestic and international liquefied natural gas (LNG) demand. 

Nick Dell’Osso, Chesapeake's CEO, said: “This powerful combination redefines the natural gas producer, forming the first US-based independent that can truly compete on an international scale.” He said demand for their products is growing, both in the US and overseas, and that the firm will now be positioned to deliver more natural gas at a lower cost, while “accelerating America's energy reach”. 

The takeover follows a wave of similar mergers that have swept across the country’s energy industry in recent months, including ExxonMobil’s US$64.5bn buyout of Pioneer, Chevron’s US$53bn agreement for Hess, and Occidental Petroleum’s takeover of CrownRock for US$12bn.