In a move that continues the consolidation of upstream energy resources, Chesapeake Energy and Southwestern Energy announced Thursday that they have agreed to a $7.4 billion all-stock merger.
The combined company, as yet unnamed, would have an enterprise value of $24 billion and would be headquartered in Oklahoma City. It would also be the largest natural gas producer in the U.S., poised to feed the emerging LNG plants and terminals along the Texas-Louisiana Gulf Coast.
Nick Dell’Osso, president and CEO of Chesapeake, made clear his ambitions for the newly-created company: “This powerful combination redefines the natural gas producer, forming the first U.S. based independent that can truly compete on an international scale.”
“The world is short energy and demand for our products is growing, both in the U.S. and overseas. We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fueling a more affordable, reliable, and lower carbon future. I look forward to leading the talented workforce of the combined organization to accelerate the long-term value opportunity for our shareholders, employees, and all stakeholders,” Dell’Osso said.
Chesapeake’s legal advisors were Latham & Watkins and Wachtell, Lipton, Rosen & Katz. Kirkland & Ellis advised Southwestern.
The agreement gives Southwestern shareholders a fixed exchange ratio of 0.0867 shares of Chesapeake common stock for each share of Southwestern common stock owned at Chesapeake’s closing Wednesday at $6.69 per share. Chesapeake shareholders will own approximately 60% and Southwestern shareholders will own approximately 40% of the combined company.
Evercore is serving as lead financial advisor to Chesapeake, along with J.P. Morgan Securities. DrivePath Advisors handled their communications. Financial advisors for Southwestern were led by Goldman Sachs & Co. along with RBC Capital Markets, BofA Securities and Wells Fargo Securities.
The Latham team is led by Houston partners Kevin Richardson, Bill Finnegan and Ryan Lynch, working with associates Denny Lee, Zainab Hashmi, Robert Cunningham, Tasbiha Batool, Rafael Go and Siyao Liu.
Advice on tax matters was provided by Houston partners Tim Fenn and Jim Cole, with associate Christine Mainguy; on finance matters by Houston partners Craig Kornreich and Pamela Kellet, New York partner Yvette Valdez and Houston counsel Natalie McFarland, with associates Michael Basist, Tiiu Lemsalu, Naffie Lamin and Chris Fanick; on benefits matters by Washington, D.C. partner Adam Kestenbaum, with associate Joe Denker; on environmental matters by Los Angeles/Houston partner Joshua Marnitz, with associate Nolan Fargo; on oil and gas matters by Houston partner Michael King, with associate Cesar Leyva; on capital markets matters by Austin partner Samuel Rettew, with associates Om Pandya and Manu Vadlamudi; on antitrust matters by Washington, D.C. partner Jason Cruise, with associates Caitlin Fitzpatrick and Mary Casale; and on data privacy matters by Houston counsel Robert Brown.
The Kirkland team was led by corporate partners Doug Bacon, Kim Hicks and Pat Salvo; debt finance partners Will Bos, Rachael Lichman and Chad Davis; capital markets partners Julian Seiguer and Anne Peetz; tax partners David Wheat and Bill Dong; executive compensation partners Rob Fowler and Stephanie Jeane; and antitrust & competition partners Jim Mutchnik and Chuck Boyars.
That the two companies were nearing a final merger agreement was reported last week by The Wall Street Journal. Headquartered in Oklahoma City, Chesapeake was once considered the epitome of risk-taking in the exploration and production end of the energy business. The company filed for bankruptcy in June 2020 and was discharged in February 2021.