Grab the popcorn, the premiere of Chesapeake Energy and Southwestern Energy Agree to a Merger is rumored to debut this week. Should the red carpet unfurl as widely expected, the $17 billion power couple will create the nation’s largest natural gas producer, a spot currently occupied by EQT.
Reese Energy Consulting today is following the latest reports of talks between CHK and SWN, which are expected to end in a final handshake over the following days. Whispers of a potential combination last October, then again in November, hit the news blotter just as the mega-merger bonanza entered full gallop. Kimmeridge Energy Management, one of the most active and vocal investment firms (and large Chesapeake investor) gave two thumbs-up to a prospective combo, remarking it would create one of the few, must-own stocks in the sector, and that the two gas giants would “eventually hammer out a deal.” Why it makes sense?
Both heavyweights operate in the Marcellus and Haynesville with a pro forma combined 1.25 million net acres and 276.8 BCFED in the Marcellus, and 871,000 net acres and 167.59 BCFED in the Haynesville. Chesapeake’s former interim CEO Mike Wisterich and current CEO Domenic Dell’Osso have resurrected the company post-bankruptcy less than three years ago. CHK is now LNG-focused with a voracious appetite to flow more gas to Gulf Coast export terminals and lock in more sales agreements. The company last year inked two HOAs for a total 3 MTPA amid a goal to supply 20% of its gas production to LNG sales. In the words of Socrates, who’s your daddy?
Chesapeake and Southwestern Energy are clients of REC, so we’ll take double butter on that popcorn please. It’s Hammer Time.