In a strategic move set to reshape the landscape of the U.S. natural gas sector, Chesapeake Energy (CHK.O) has entered into a definitive agreement to acquire Southwestern Energy (SWN.N) in an all-stock transaction valued at $7.4 billion. The deal, announced on Thursday, positions Chesapeake Energy as the largest independent U.S. natural gas producer.
The transaction reflects Chesapeake’s confidence in the resilience of natural gas prices, anticipating a rebound from the multi-year lows witnessed last year. The company is banking on increased demand, particularly from proposed new U.S. liquefied natural gas (LNG) export terminals projected to experience a surge in 2025.
Following the announcement, Southwestern Energy’s stock experienced a marginal decline, opening Thursday’s trading session at $6.80, slightly below Wednesday’s closing price of $6.89. The stock witnessed heavy trading activity, with over 58 million shares changing hands, significantly surpassing the daily average of 20.5 million shares.
At the time of this publication, Southwestern Energy Co stock (SWN) has witnessed a decline.
Southwestern Energy Co
Current Price: $6.75
Change : -0.14
Change (%): (-2.03%)
Volume: 58.4M
Source: Tomorrow Events Market Data
Chesapeake’s CEO, Domenic Dell’Osso, expressed optimism about the merger, stating, “By combining our companies, we are LNG-ready.” Dell’Osso is set to assume the top position in the yet-to-be-named combined entity, with the acquisition expected to conclude in the next quarter.
The offer made by Chesapeake, valued at $6.69 per Southwestern Energy share, represented a slight discount of approximately 3% to the stock’s previous close. Despite this, Chesapeake’s shares surged by 6.2% in morning trading on Thursday.
The consolidated company aims to have up to 20% of its future production tied to international pricing, signaling a strategic alignment with the anticipated rise in LNG demand. Analysts, including Matt Portillo from Tudor Pickering & Holt, believe that the larger output from the merged entity will enhance its ability to unlock and secure additional LNG opportunities.
The move is pivotal for Chesapeake, which seeks to reclaim its position as the largest U.S. gas producer following its emergence from bankruptcy restructuring in 2021. In 2023, the company strengthened its foothold in the gas-rich shale plays of the U.S. northeast with a $2.5 billion acquisition of Chief E&D.
Investment firm Kimmeridge Energy Management, holding just over 2% stakes in both companies, expressed strong support for the merger. The majority of Southwestern Energy’s production is concentrated in Appalachia’s shale formations and the Haynesville shale basin, strategically located near U.S. LNG export facilities.
Upon completion of the deal, the combined company will boast a production capacity of approximately 7.9 billion cubic feet equivalent per day (Bcfepd), surpassing EQT Corp (EQT.N) to become the largest independent natural gas exploration and production company in the U.S. in terms of market value and output.
The transaction is slated to conclude in the second quarter, marking the end of the Chesapeake brand, which has endured for almost 35 years since its founding by wildcatters Aubrey McClendon and Tom Ward. Chesapeake Energy shareholders will retain a 60% ownership stake in the combined company, with Southwestern investors holding the remaining 40%.
This landmark deal is part of a broader trend in the U.S. energy sector, characterized by multi-billion-dollar consolidations aimed at securing future production. Notable recent examples include Exxon Mobil’s $60-billion pending offer for Pioneer Natural Resources and Chevron’s $53-billion agreement to acquire Hess. Just last week, APA Corp finalized a $4.5 billion deal to acquire Callon Petroleum.
