Chesapeake Energy and Southwestern Energy agreed to merge in an all-stock transaction valued at $7.4 billion that would create the largest natural-gas producer in the U.S., the Wall Street Journal reported. The deal is in large part a bet that booming liquefied-natural-gas exports from the shores of Texas and Louisiana will allow drillers to sell more of their product to Europe, Asia and other global markets craving American fuel. It also continues a wave of consolidation that has swept across the U.S. energy industry in recent months. With a market capitalization of more than $17 billion, the combined company would be endowed with a huge position in one of the U.S.’s largest gas basins in the Northeast, as well as in a big gas-producing region near the Gulf Coast. Huge terminals there have helped make the U.S. the world’s top LNG exporter. The deal, at $6.69 a share, values Southwestern at a 2.9% discount to its closing market value of about $7.6 billion on Wednesday. The deal enshrines Chesapeake’s return to its natural-gas roots. Co-founded in 1989 by flamboyant wildcatter Aubrey McClendon, Chesapeake was at the vanguard of the fracking boom, borrowing billions of dollars to nab millions of acres across Louisiana, Texas and Appalachia. When overproduction drove down natural-gas prices in the early 2010s, the company started diversifying into oil, a move that eventually backfired when crude prices faltered. The company was laden with debt as it entered the pandemic’s price spiral and in 2020 it filed for bankruptcy. The company emerged from chapter 11 having shed more than $7 billion of debt. It pivoted back to natural gas, making the $1.1 billion acquisition of Haynesville driller Vine Energy in 2021, and of Marcellus Shale producer Chief and associated assets the following year for about $2.6 billion.
