McLendon-Founded Chesapeake Energy Returns to Deal Making in Oil Patch -- WSJ
October 31 2018 - 2:02AM
Dow Jones News
By Rebecca Elliott
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 31, 2018).
After years of selling assets to pay down debt, Chesapeake
Energy Corp. is growing again.
The Oklahoma-based driller said Tuesday that it would buy
WildHorse Resource Development Corp. in a deal valued at nearly $4
billion, including debt.
Under the deal, Chesapeake would add about 420,000 acres in the
Eagle Ford and Austin Chalk formations, nearly tripling the
company's footprint in Texas, and boosting its oil production.
"It's a pivot today for us," Chesapeake Chief Executive Doug
Lawler said in an interview, explaining that he thinks the industry
is at an "inflection point" when it comes to consolidation. "We've
gone through a period with these difficult prices and we've seen a
lot of smaller players emerge. And in order to capture greater
value, it really requires that you have some of the larger scale,
the technology and the efficiencies."
Chesapeake, a company co-founded by the late shale pioneer
Aubrey McClendon, was once the country's second-largest natural gas
producer. But it has struggled with debt and has sold billions in
oil and gas holdings since Mr. Lawler took over in 2013, including
a $2 billion deal announced in July to shed its last remaining
acreage in Ohio's Utica Shale.
The company's net debt as of the end of the second quarter was
$9.2 billion, down from nearly $16 billion in 2012.
Under terms of the deal, WildHorse owners can trade each of
their shares in the company for either 5.989 shares of Chesapeake
stock or a combination of 5.336 shares of Chesapeake stock and $3
in cash, the companies said in a statement Tuesday. Under deal
terms, Chesapeake will assume the value of WildHorse's net debt of
$930 million. The companies project $200 million to $280 million in
average annual cost savings.
The deal is the latest move toward consolidation in the shale
patch as investors push companies to rein in spending. Diamondback
Energy Inc. announced a deal in August to acquire Energen Corp. for
more than $9 billion, including debt. Concho Resources Inc. agreed
in March to buy RSP Permian Inc. for about $9.5 billion.
Chesapeake's acquisition is expected to close in the first half
of 2019 and is subject to shareholder approval.
--Micah Maidenberg contributed to this article.
Write to Rebecca Elliott at rebecca.elliott@wsj.com
(END) Dow Jones Newswires
October 31, 2018 02:47 ET (06:47 GMT)
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