Chesapeake, Southwestern Defer Merger as Regulator Seeks More Information

SEATTLE (Oil Monster): Chesapeake Energy has announced that its proposed merger with Southwestern Energy has been deferred to the latter half of the year. 

The delay follows a second request for additional information from a US regulator. 

In January this year, the companies announced an all-stock merger valued at $7.4bn. At the time, they said the deal could conclude by the second quarter of 2024.  

The merger is now under scrutiny by the FTC, reflecting a broader trend of US lawmakers calling for more rigorous examination of multi-billion-dollar deals within the oil and gas sector. 

In a filing, Chesapeake said: “On 4 April, Chesapeake and Southwestern each received a request for additional information and documentary materials from the FTC in connection with the FTC’s review of the merger. 

“Chesapeake and Southwestern will continue to work cooperatively with the FTC in its review of the merger, and now expect that the merger will be completed in the second half of 2024, subject to the fulfilment of the other closing conditions, including approvals of Chesapeake and Southwestern shareholders.” 

As per Reuters' report, last month, nearly 50 Democrats from the US Congress urged the FTC to intensify probes into oil and gas company mergers to safeguard consumers and maintain competitive markets.  

This heightened oversight has also impacted other major industry players such as ExxonMobil, Pioneer Natural Resources, Chevron and Occidental Petroleum, all of which have received similar requests from the FTC regarding their respective multi-billion-dollar mergers. 

Chesapeake's acquisition of its smaller competitor Southwestern Energy is anticipated to create an energy company with extensive acreage in Appalachia and Haynesville basins.  

The combined entity from the Chesapeake and Southwestern Energy merger is expected to have a production rate of around 7.9 billion cubic feet equivalent per day, with a portfolio heavily weighted towards natural gas.  

Earlier in February, Chesapeake announced plans to scale back its natural gas production and capital expenditure for the year, citing an oversupplied market.  

The company intends to reduce its output to approximately 2.7 billion cubic feet per day (bcf/d) in 2024, down from an estimated 3.6bcf/d in 2023, which comprised nearly 95% natural gas and 5% liquids. 

 Courtesy:  www.globaldata.com