Chesapeake Energy has signed an agreement to acquire Texas-based natural gas producer Vine Energy in a cash-and-stock deal worth $2.2bn.
Vine is focused on the development of natural gas properties in the stacked Haynesville and Mid-Bossier shale plays in the Haynesville Basin of Northwest Louisiana.
Funds managed by The Blackstone Group own approximately 70% of outstanding shares of Vine common stock.
The deal is expected to more than double Chesapeake’s gas output from the Haynesville shale field in Louisiana.
Besides, it is anticipated to increase the company’s cumulative five-year free cash flow outlook by approximately $1.5bn to approximately $6bn.
Chesapeake’s board chairman and interim chief executive officer Mike Wichterich said: “This transaction strengthens Chesapeake’s competitive position, meaningfully increasing our free cash flow outlook and deepening our inventory of premium gas locations, while preserving the strength of our balance sheet.
“By consolidating the Haynesville, Chesapeake has the scale and operating expertise to quickly become the dominant supplier of responsibly sourced gas to premium markets in the Gulf Coast and abroad.”
Subject to customary closing conditions, including certain regulatory approvals, the transaction is expected to be completed in the fourth quarter of 2021.
The acquisition is anticipated to increase Chesapeake’s total production from just over 400,000 barrels of oil equivalent per day (boed) to approximately 600,000boed.
Apart from diversifying Chesapeake’s midstream partnerships, the deal is expected to decrease its pro forma total gathering, processing and transportation (GP&T) expense by approximately 15%.
The acquisition will also result in nearly $50m in average annual savings expected from operating and capital synergies
Vine’s chairman, president, and chief executive officer Eric Marsh said: “We firmly believe that the quality of our assets, combined with the scale, depth and diversity of Chesapeake’s portfolio, and our shared unwavering commitment to ESG excellence, provides significant opportunity to accelerate the return of capital to our combined shareholders.”
In February this year, US shale gas producer Chesapeake emerged from bankruptcy after collapsing due to oil price crash that occurred last year.
