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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



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