An expected merger of two natural gas companies will create the largest independent U.S. producer, unseating Pittsburgh-based EQT Corp.
Chesapeake Energy Corp. and Southwestern Energy Corp. on Jan. 11 announced the $7.4 billion, all-stock deal. The merger will combine the two companies’ positions in the Marcellus shale of Appalachia and the Haynesville play in Louisiana and Texas.
When completed, as expected in the second quarter of this year, the new company will have about 7.9 billion cubic feet (Bcf) of gas production per day, more than the 6 Bcf of EQT. The company, which will have a new name, will also become the third-largest natural gas producer in the world, behind only Chevron and ExxonMobil. The merged company will have a market capitalization of $17 billion, also larger that EQT’s $15.56 billion.
The merger is aimed at the increasing liquefied natural gas (LNG) export market, as the Haynesville gas play is near Louisiana LNG export terminals. U.S. exports have been increasing dramatically as Europe and other countries seek new sources of fuel, and Energy Information Agency data shows the U.S. is now the top exporter of LNG. That trend is expected to continue through 2050, according to the EIA, due to geopolitical instability and natural gas’s lower carbon footprint that allows it to be a bridge fuel during the energy transition to meet climate goals.
The announcement of the deal indicates that the new company will build a global marketing and trading presence in Houston, Texas, to meet increasing domestic and international demand.
EQT has also been focused on increasing LNG exports, with CEO Toby Rice lobbying for his “Unleash LNG” strategy, which would quadruple U.S. LNG exports to replace coal used internationally and to quell energy security concerns in Europe after Russia invaded Ukraine. Rice has said that accomplishing that goal would reduce global emissions by 1.1 billion metric tons per year, since natural gas emits much less CO2 than coal when burned.
EQT recently announced that it had reached an agreement for the Texas LNG facility now under development to produce 500,000 tons a year of LNG from the company’s natural gas to sell to international markets. Construction on the LNG facility is expected to begin this year. The deal with EQT will run for 15 years.
Chesapeake, which was one of the pioneers of unconventional well development in western Pennsylvania, still operates a large number of wells in northeast Pennsylvania. Southwestern also has wells in western Pennsylvania and West Virginia. The combined company will have more than more than 5,000 locations and 15 years of inventory, the announcement said.
The Chesapeake-Southwestern deal is the latest in a number of high-profile consolidations, as ExxonMobil last year acquired Pioneer Resources, and Chevron bought Hess, according to Reuters.