Chesapeake Energy, one of the first companies to tap the Marcellus shale for natural gas, is acquiring Chief Oil and Gas in a deal that will make the company one of the largest producers in Pennsylvania. The recent deal calls for Chesapeake to pay $2 billion in cash and 9.44 million common shares of stock to Tug Hill Inc., which owns Chief W&D Holdings, according to a press release. The total value of the deal is about $2.6 billion. Both companies have large natural gas operations in Northeast Pennsylvania. Chesapeake, which emerged from bankruptcy in 2021, said in a presentation that the move is about “simplifying and strengthening our portfolio,” and refocusing its efforts on its core assets in Marcellus natural gas. It is the latest combination of companies in the Marcellus. EQT in 2020 bought Chevron’s Marcellus assets in Southwestern Pennsylvania and followed that with the purchase of Alta Resources’ assets in the northeast part of the state last year. “We know the importance of scale and the Chief and Tug Hill assets fit like a glove with our existing position in the northeast Marcellus Shale. The acquisition checks all the boxes: it lengthens our premium inventory, further focuses our capital allocation, provides operational efficiencies, is accretive to free cash flow per share, allows us to grow our base dividend, preserves our balance sheet strength and improves our (greenhouse gas) emissions metrics,” said Nick Dell’Osso, Chesapeake president and CEO. As part of the deal, Chesapeake will get 113,000 net acres in the Marcellus, bringing the company’s total to 635,000 acres. That will allow production capacity to be increased by up to 200 million cubic feet a day compared to the two companies’ previous output, through optimizing shared pipelines and other midstream facilities. It will also increase Chesapeake’s undeveloped locations by about 25 percent, which will extend its drilling inventory by more than 15 years. In all, $50 to $70 million in annual efficiencies through the combination of assets is expected. At the same time, Chesapeake also signed an agreement to sell its Powder River Basin assets in Wyoming to Continental Resources, Inc. for about $450 million and will use that money toward the Chief purchase. That sale includes about 172,000 net acres and 350 wells. Chesapeake will now operate in three natural gas basins - the Marcellus, Haynesville, and Eagle Ford.