US-based Chesapeake Energy and its rival upstream company Southwestern Energy are reportedly on the verge of signing a merger deal to form an enlarged company with a valuation of around $17bn.
An agreement could be signed as early as this week, which will be contingent upon the talks remaining intact, reported Reuters, citing an undisclosed source with knowledge of the matter.
The source requested to be anonymous as discussions between the parties are currently confidential.
According to the publication, a possible transaction between Chesapeake Energy and Southwestern Energy has the potential to establish a company surpassing EQT as the largest natural gas-focused exploration and production firm in the US by market value. This comes at a time when shale companies, aiming for scale and efficiency, are driving swift consolidation within the energy sector, wrote the news agency.
A potential deal involving the acquisition of Southwestern Energy by Chesapeake Energy was reported last October itself with discussions said to be in the initial stages.
At that time, Southwestern Energy, which is a natural gas and natural gas liquids producer, had a market valuation of $12bn, inclusive of its debt.
Southwestern Energy’s assets span over 938,000 net acres situated in the Appalachia and Haynesville Basins. As of the year ending on 31 December 2022, the company achieved a production of 1,733 billion cubic feet equivalent (Bcfe).
Additionally, its proved reserves at the close of 2022 amounted to 21.6 trillion cubic feet equivalent (Tcfe).
On the other hand, Chesapeake Energy, which emerged from bankruptcy in 2021, has been strategically divesting its oil-producing assets to prioritise natural gas.
Recently, Chesapeake Energy closed the $700m sale of its oil and gas assets in South Texas to SilverBow Resources. The deal marked the exit of the American shale gas producer from the Eagle Ford basin.
Currently, the Oklahoma City-based company is focused on producing natural gas from the Haynesville and Marcellus shales for domestic and international use.
