Chesapeake Power Corp. and Southwestern Power conform to merge

The strategic mixture will create a premier power firm underpinned by a number one pure fuel portfolio adjoining to the best demand markets, premium stock, resilient free money circulation, and an funding grade high quality steadiness sheet. The mixed firm, which can assume a brand new identify at closing, will probably be uniquely positioned to ship inexpensive, decrease carbon power to satisfy rising home and worldwide demand with important, sustainable money returns to shareholders by way of cycles.

Transaction highlights:

• Establishes business’s premier pure fuel portfolio: By combining top quality, giant scale acreage in Appalachia and Haynesville, the professional forma firm has present web manufacturing of roughly 7.9 billion ft³-e/d with greater than 5000 gross places and 15 years of stock.
• Annual operational and overhead synergies of roughly US$400 million: Recognized synergies will improve shareholder worth by way of improved capital efficiencies and working margins pushed by longer laterals, decrease drilling and completion prices, G&A reductions, and the utilisation of shared operational infrastructure.
• Accretive to all key monetary metrics: The mixture is predicted to be instantly accretive to all key per share monetary metrics together with working money circulation, free money circulation, money dividends, and web asset worth, in addition to ROCE.
• Creates world platform to increase advertising and buying and selling enterprise, reaching extra markets, mitigating worth volatility and growing income: With a purpose to maximise worth of the mixed firm’s scale of manufacturing, funding grade high quality capital construction and 100% licensed responsibly sourced fuel, the corporate will construct a world advertising and buying and selling presence in Houston to produce lower-cost, decrease carbon power to satisfy growing home and worldwide LNG demand.
• Will increase shareholder worth by way of synergy enhanced, best-in-class return framework: By way of Chesapeake’s current shareholder return framework, the mixed firm expects an approximate 20% enchancment in dividends per share over 5 years resulting from important synergies and larger professional forma free money circulation technology.
• Funding grade high quality capital construction: The mixed firm stays dedicated to sustaining a web leverage ratio beneath one occasions and funding grade metrics leading to a decrease value of capital and improved credit score profile. These attributes will improve entry to and returns from advertising and LNG alternatives.
• Sustainability management: The mixed firm will preserve its low pure fuel emissions profile, dedication to reaching web zero Scope 1 and a couple of greenhouse fuel emissions by 2035, clear disclosure on measurable targets, funding in low-carbon options, and social and governance excellence.

“This highly effective mixture redefines the pure fuel producer, forming the primary US-based unbiased that may actually compete on a world scale. The union creates a deep stock of advantaged property adjoining to excessive demand markets, permitting for the appliance of confirmed operational practices and the facility of an funding grade high quality steadiness sheet to drive important synergies benefiting power customers and shareholders alike,” mentioned Nick Dell’Osso, Chesapeake’s President and CEO. “The world is brief power and demand for our merchandise is rising, each within the US and abroad. We will probably be positioned to ship extra pure fuel at a decrease value, accelerating America’s power attain and fuelling a extra inexpensive, dependable, and decrease carbon future. I sit up for main the gifted workforce of the mixed organisation to speed up the long-term worth alternative for our shareholders, staff, and all stakeholders.”

Southwestern President and CEO, Invoice Method, added: “I wish to thank your entire Southwestern crew for positioning the corporate to be a part of this transformational mixture. Collectively, Southwestern and Chesapeake can drive improved margins and returns from our extremely complementary portfolios by way of enhanced scale, capital allocation flexibility, and entry to premium markets to produce rising world pure fuel demand. Most significantly, each units of shareholders are in a position to take part within the substantial worth creation and future development alternatives of the mixed firm, with one of many high shareholder return frameworks within the sector.”

The transaction, which is topic to customary closing circumstances, together with approvals by Chesapeake and Southwestern shareholders and regulatory clearances, is focused to shut in 2Q24.

Evercore is serving as lead monetary advisor, J.P. Morgan Securities LLC as Monetary Advisor, Latham & Watkins LLP and Wachtell, Lipton, Rosen & Katz as Authorized Advisors, and DrivePath Advisors as communications advisor to Chesapeake. Morgan Stanley additionally suggested Chesapeake.

Goldman Sachs & Co. LLC. is serving as lead monetary advisor and RBC Capital Markets, LLC together with BofA Securities and Wells Fargo Securities, LLC as monetary advisors. Kirkland & Ellis LLP is serving as authorized advisor, and Joele Frank as communications advisor to Southwestern Power.

Learn the article on-line at: https://www.lngindustry.com/liquid-natural-gas/15012024/chesapeake-energy-corp-and-southwestern-energy-agree-to-merge/