Page 4 - NorthAmOil Week 04 2022

NorthAmOil COMMENTARY NorthAmOil

Chesapeake confirms Chief

acquisition, announces

PRB sale

Chesapeake Energy has confirmed that it is acquiring Chief E&D

Holdings and has also announced the sale of its Powder River Basin
assets to Continental Resources

US CHESAPEAKE Energy confirmed this week valued at $2.2bn, boosting its footprint in Lou-
that it was buying privately owned Chief E&D isiana’s Haynesville shale gas play, and now its
WHAT: Holdings for about $2.6bn in cash and stock. The purchase of Chief illustrates that it wants to grow
Chesapeake is acquiring companies had been reported to be in advanced in more than one region. Chesapeake stated
Chief E&D Holdings and talks over a potential acquisition last week. (See on January 25 that the latest transactions were
selling its assets in the NorthAmOil Week 03) aimed at strengthening its portfolio, boosting its
Powder River Basin. Additionally, Chesapeake said it had agreed free cash flow and raising its dividend payments.
to sell its assets in Wyoming’s Powder River “Like other M&A deals announced in this
WHY: Basin to Continental Resources for around cycle, the acquisition looks to build scale for
The company is trying $450mn in cash. future development while also being strongly
to build scale in its core The deals illustrate that the wave of mergers accretive to cash flow generation out of the
regions while shedding and acquisitions (M&As) that started in the sec- gate and improving GHG emissions metrics,”
non-core operations. ond half of 2020 has not yet run out of steam a director at energy analytics firm Enverus,
– though stronger commodity prices mean Andrew Dittmar, said in a note on Chesapeake’s
WHAT NEXT: that some of the drivers behind the deals have acquisition of Chief. He noted that the latest
For Continental the changed. Other drivers, though, have remained acquisition puts Chesapeake ahead of rival shale
Powder River Basin consistent throughout this M&A wave, includ- gas player EQT and just behind Southwestern
acquisition comes as its ing a desire to build scale through acquisitions Energy in terms of money spent on M&As since
core assets mature. rather than focusing on growth through drilling. the emergence of the coronavirus (COVID-19)
pandemic. The core
Expansion “Having assets in both the Haynesville and
Chesapeake is buying Chief – and associated Marcellus provides optionality for Chesapeake Marcellus region
non-operated interests held by Tug Hill – for to target the highest return opportunities based in Northeast
around $2.0bn in cash and 9.44mn shares worth on relative pricing,” Dittmar continued. “These
roughly $600mn. The transaction means that two plays have run neck and neck for the most Pennsylvania
Chesapeake will expand its position in North- gas-focused M&A with $7.7bn in Haynesville
east Pennsylvania’s Marcellus shale. The Chief deals and, including the latest Chesapeake will now be
and Tug Hill assets consist of roughly 113,000 buy, $7.8bn in the Marcellus. Outside of these
net acres (457 square km). The properties are two plays plus some Appalachian deals more concentrated in
forecast to produce 835mn cubic feet (24mn focused on the Utica, there has been little the hands of just
cubic metres) per day of gas over the first nine gas-focused M&A.”
months of 2022. According to Chesapeake’s CEO, Nick three companies.
The Chief acquisition and Powder River sales Dell’Osso, the Chief acquisition means that the
represent the latest in a series of major moves core Marcellus region in Northeast Pennsylva-
for Chesapeake since its emergence from bank- nia will now be concentrated in the hands of
ruptcy protection in February 2021. The com- just three companies – Chesapeake, EQT and
pany had tried to shift its focus from natural gas Coterra Energy. He suggested to the Financial
to oil prior to entering Chapter 11 bankruptcy Times that this means consolidation in the Mar-
protection, but following its emergence, it has cellus may be coming to an end.
pivoted back to natural gas. For its part, Chief joins the ranks of privately
Last year, it acquired Vine Energy in a deal owned companies taking advantage of higher

P4 www. NEWSBASE .com Week 04 27•January•2022