Houston-based Chord Energy Corp. announced late Wednesday it agreed to buy Canada’s Enerplus for $4.2 billion in stock and cash.
Under the deal’s terms, each Enerplus common share will be exchanged for a 0.10125 of a Chord share and $1.84 in cash, which represents 90 percent in stock and the rest cash. Based on the closing price as of Feb. 20, the implied value to each Enerplus share is $18.42, representing a 15 percent premium.
At this exchange ratio and the companies’ closing share prices on Feb. 20, the combined company would have an enterprise value of around $11 billion.
When the transaction closes, Chord will be issuing 20.7 million shares to Enerplus stockholders, resulting in Chord shareholders owning about 67 percent of the combined company and Enerplus holding the balance. The board will increase to 11 members, with four representatives from Enerplus.
The deal is expected to close by mid-year 2024 if it clears the U.S. and Canada as well as Chord and Enerplus shareholders.
The announcement of Chord combining with Enerplus forms a more formidable Williston-focused exploration and production company, according to TPH&Co. analyst Oliver Wang.
“[The] deal is one that we think the market can get behind and makes sense given the industrial logic while supporting management’s view of wanting to add incremental scale over time to drive a bigger and better company,” he said in a note. “We see the combined company continuing to execute on the mantra of FCF [free cash flow] generation and top-tier shareholder returns.”
Wang inferred that Chord’s outperformance over the last 12 to 15 months might be the reason for the 15 percent premium paid.
Last night’s conference call focused on the combined company’s operations and synergies and what the deal means for future acquisition and divestiture activity, he noted, but the focus right now is on Chord/Enerplus.
“No reason to speculate on future deals, but strength of pro-forma b/s [balance sheet] provides flexibility for returns/opportunities,” he said.
Chord is the result of the merger between Whiting Petroleum Corp. and Oasis Petroleum Inc. in 2022 (Kirkland & Ellis advised Whiting and Vinson & Elkins assisted Oasis). Last year, Chord agreed to acquire assets in the Williston Basin from XTO Energy Inc., a unit of Exxon Mobil Corp., for $375 million in cash.
Chord tapped Citi as financial advisor and Vinson & Elkins, Wachtell, Lipton, Rosen & Katz and Goodmans as legal advisors. Wells Fargo Securities and J.P. Morgan Securities are also Chord’s financial advisors.
Enerplus used Evercore and RBC Capital Markets as financial advisors and Blake, Cassels & Graydon and Latham & Watkins as legal advisors. BMO Capital Markets and CIBC Capital Markets are also co-financial advisors to Enerplus.
The Vinson & Elkins team was led by partners David Oelman, Steve Gill, Benji Barron and senior associate David Lassetter with assistance from associates Matt Fiorillo, John Frey and Jack Kimmel. Special assistance was provided by senior associate Layton Suchma and associates Elisie Lee, Libby Gerstner, Connor Rabalais, Waleed Vohra and Hope Kaady.
Also advising from V&E were partners Ryan Carney, Lina Dimachkieh, counsel Peter Rogers and associate Tyler Underwood (tax); partners David D’Alessandro, Dario Mendoza, senior associate Mary Daniel Morgan and associates Cassandra Zárate and Henry Crowell (executive compensation/benefits); and partner Matt Dobbins and associate Ryan Vanderlip (environmental).
Others were partner Suzanne Clevenger (energy regulatory); partner Becky Baker and counsel Phileda Tennant (employment/labor); partner Darren Tucker and counsel Evan Miller (antitrust); partners James Longhofer, Erec Winandy and associate Peggy Goldman (finance); and counsel Rajesh Patel and associate Haley Titcomb (technology transactions/IP).
The Wachtell team was led by partners Daniel Neff and Zachary Podolsky.
The Latham & Watkins group was led by Houston partners John Greer, Ryan Lynch and Bill Finnegan with associates Denny Lee, Haley Sandoval, Rebekah Bingham and Jeffrey Romano.
Advice was also provided on tax matters by Houston partners Tim Fenn and Jared Grimley with associate Dominick Constantino; on benefit matters by Washington, D.C. partner Adam Kestenbaum and Houston counsel Krisa Benskin with associate Christina Schrantz; on environmental matters by Los Angeles/Houston partner Joshua Marnitz with associate Nolan Fargo; and on intellectual property and data privacy matters by New York partner Jessica Cohen and Houston counsel Robert Brown with associate Alex Theuer.
Counsel was offered on antitrust matters by Washington, D.C. partner Jason Cruise with associate Ivy Ziedrich; on oil and gas matters by Houston partner Michael King with associate Cesar Leyva; on anti-corruption matters by Washington, D.C./New York partner Nicholas McQuaid with associate Teddy Ulin; and on finance matters by Houston partner Matthew Jones with associate Chris Wood.
The combined company claims in a press release that it will have a premier Williston Basin position with deep, low-cost producing inventory of about 1.3 million net acres and enhanced free cash flow generation to return capital to shareholders.
“This combination further strengthens our Williston Basin position and represents a compelling opportunity for both companies’ shareholders,” said Danny Brown, Chord’s president and CEO. “The combined company is expected to benefit from improving returns, capital efficiency, low-cost inventory and a peer-leading balance sheet, all of which support sustainable free cash flow generation and meaningful shareholder returns.”
Ian Dundas, Enerplus’ president and CEO, said joining forces with Chord will provide Enerplus shareholders with immediate value for their investment and the opportunity to participate in the upside potential from ownership in a stronger, larger company with enhanced shareholder returns.
Brown will serve as director, president and CEO of the combined company. The rest of the company’s leadership team will include Michael Lou, Chord’s CFO, Darrin Henke, Chord’s COO, and Shannon Weinberg Kinney, Chord’s general counsel. Dundas will be a board director and advisor to Brown.
Kinney has been Chord’s GC for eight months. She previously was deputy general at counsel ConocoPhillips and TPC Group and an associate at Bracewell and Andrews Kurth.
The combined company expects to benefit from administrative, capital and operating synergies of up to $150 million per year, with administrative cost savings anticipated to begin immediately in 2024 and increase in 2025 up to $40 million, the company said.
Capital synergies are expected to increase up to $55 million in 2025 and operating synergies will start in 2025 and are anticipated to reach up to $55 million in 2026. The after-tax present value of synergies is expected to exceed $750 million.