Chesapeake Energy has signed an agreement to acquire Texas-based oil and gas producer WildHorse Resource Development in a cash-and-stock deal worth nearly $4bn.
Image: WildHorse has operations in the Eagle Ford Shale and Austin Chalk formations. Photo courtesy of rawpixel on Unsplash.
The acquisition of WildHorse, which operations in the Eagle Ford Shale and Austin Chalk formations in southeast Texas, is expected to expand oil growth platform of Chesapeake.
Following the completion of the transaction, Chesapeake shareholders will own nearly 55% of the combined company, while WildHorse shareholders will own approximately 45%.
The transaction is expected to enable Chesapeake to make progress toward achieving its strategic and financial goals.
Chesapeake’s president and chief executive officer Doug Lawler said: “This transaction accelerates Chesapeake’s strategic plan and expands the value-creation opportunities for our shareholders by adding a premier asset at an attractive valuation, significantly boosting oil production, EBITDA margins and cash flow growth, while improving our leverage metrics.”
Oil production of the combined entity is anticipated to increase to a projected range of 125,000 to 130,000 barrels (bbls) of oil per day in 2019, and 160,000 to 170,000 bbls of oil per day in 2020.
Providing a strategic access to premium Gulf Coast markets, the transaction adds nearly 420,000 high margin net acres in the Eagle Ford Shale and Austin Chalk formations to the portfolio of Chesapeake.
Of the total acreage addition, nearly 80 to 85% is currently undeveloped.
In addition, the acquisition of WildHorse asset is expected to complement existing high margin Eagle Ford and Powder River Basin positions of Chesapeake.
The transaction is expected to result in projected average annual savings of $200 to $280m, totaling $1 to $1.5 billion by 2023, due to operational and capital efficiencies.
Lawler said: “The addition of WildHorse, together with our substantial growth profile in the Powder River Basin, advances our transformation into a highly competitive company with a diverse portfolio of high-quality assets, a stronger balance sheet and meaningful oil-growth potential.”
Chesapeake intends to fund the cash portion of the acquisition, which is expected to be between $275m and nearly $400m, through its revolving credit facility.
The transaction is expected to be completed in the first half of 2019.
In July, Chesapeake agreed to divest interests in the Utica Shale oil and gas assets located in Ohio to Encino Acquisition Partners (EAP) for approximately $2bn.