US-based natural gas producer Cabot Oil & Gas has agreed to merge with Permian Basin operator Cimarex Energy in a deal that values the combined business at nearly $17bn.
The all-stock deal will see Cimarex Energy’s shareholders issued 4.0146 shares of Cabot Oil & Gas’ shares for each share of Cimarex Energy common stock owned.
In the combined company, which will operate under a new name, Cabot Oil & Gas’ shareholders will have a stake of nearly 49.5%. On the other hand, Cimarex Energy’s shareholders will have a stake of around 50.5% in the enlarged firm, which will be based in Houston, Texas.
The combined entity is expected to hold a multi-decade inventory of development locations in the premier oil and natural gas basins in the US.
Cabot Oil & Gas, which is based in Texas, has 100% of its operations focused on the Marcellus Shale. The natural gas producer has close to 173,000 net acres in northeast Pennsylvania’s portion of the Marcellus Shale.
The company has been planning to drill and complete nearly 80 net wells for the full year 2021 with a capital budget of $530-540m.
Cimarex Energy has operations across Oklahoma, Texas, and New Mexico where it holds a combined acreage of around 560,000 net acres. Currently, most of the company’s operations are confined to the Permian Basin and the Anadarko Basin in Western Oklahoma.
Cabot Oil & Gas chairman, president, and CEO Dan Dinges said: “The combination of Cabot and Cimarex will create a free cash flow focused, diversified energy company with the scale, inventory and financial strength to thrive across commodity price cycles.
“The combined business will be overseen by an experienced Board and a management team that is committed to a prudent strategy built on disciplined capital investment, strong free cash flow generation and increasing returns to shareholders.”
The combined firm’s CEO will be Thomas Jorden, who is currently Cimarex Energy’s chairman, president, and CEO.
Jorden said: “This transformational merger will combine our top-tier assets and advance our shared focus on delivering superior returns for investors.
“We’re building an even more resilient platform with greater financial strength in order to deliver sustainable, through-cycle returns on and of capital. We view commodity, geography and asset diversification as strategic advantages that will drive more resilient free cash flow and long-term value creation.”
The transaction is expected to be finalised in Q4 2021. It will be contingent on regulatory clearance, shareholders’ approvals of the merging firms, and other customary closing conditions.
