Chesapeake Energy

Chesapeake Energy and Southwestern to create a combined company

Upstream company Chesapeake Energy has agreed to acquire rival Southwestern Energy for US$7.4 billion. The deal will create a combined gas drilling company that will be the market leader in the US.
Under the terms of the deal, the Oklahoma-based fossil fuel producer will pay US$6.7 per share. The deal is due to close in the second quarter of 2024, subject to regulatory approval. Chesapeake will change its name following the acquisition.
The acquisition aims to strengthen its market position in the US natural gas business. Chesapeake plans to become the most significant competitor to industry leader EQT. It will also expand its presence in two key regions:
– the Haynesville Basin between Louisiana and Texas;
– the Marcellus Basin in the Appalachian Mountains.
Chesapeake Energy will be able to increase its natural gas exports from the Haynesville play. This is important given the growing demand for fuel in the Gulf of Mexico.
The combined business will include Southwestern’s drilling rigs and hydraulic fracturing specialists. This will provide the buyer with highly skilled professionals who understand the specifics of the area.
Chesapeake’s desire to focus its resources on natural gas production is also behind the deal. According to Gabriele Sorbara of Siebert Williams, combining the two companies will take the producer to the next level. The revamped company will be the largest in the US regarding fuel production and exploration.

Chesapeake Energy US

An overview of the company’s operations

Aubrey McClendon and Tom Ward founded Chesapeake Energy in 1989. They chose the name in honour of the Chesapeake Bay. In 2006, the partners parted ways: Ward left to start his own business.
The company grew rapidly:
– initial capital in 1989 was US$50,000;
– after the IPO in 1993, the valuation of the business reached US$25 million.
Chesapeake gained a strong foothold in the US natural gas market by increasing its focus on horizontal drilling strategies. The company was active in fields in Oklahoma and Texas.
During the 1997 crisis, the company wrote down the value of its assets by more than US$200 million. This amount was almost equal to the company’s share capital at the time. This was Chesapeake’s response to the fall in world commodity prices. This allowed Chesapeake to rebuild its position and stay afloat gradually.
In the 2000s, the US natural gas sector experienced rising prices, which allowed the company to refocus its operations. Chesapeake adapted drilling techniques, opening up new opportunities for field development. It began actively producing gas from tight sandstones and shales, including the Barnett and Marcellus basins. These changes significantly increased production volumes and helped the company become an industry leader.