McLendon-Founded Chesapeake Energy Returns to Deal Making in Oil Patch -- WSJ

By Rebecca Elliott 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 31, 2018).

After years of selling assets to pay down debt, Chesapeake Energy Corp. is growing again.

The Oklahoma-based driller said Tuesday that it would buy WildHorse Resource Development Corp. in a deal valued at nearly $4 billion, including debt.

Under the deal, Chesapeake would add about 420,000 acres in the Eagle Ford and Austin Chalk formations, nearly tripling the company's footprint in Texas, and boosting its oil production.

"It's a pivot today for us," Chesapeake Chief Executive Doug Lawler said in an interview, explaining that he thinks the industry is at an "inflection point" when it comes to consolidation. "We've gone through a period with these difficult prices and we've seen a lot of smaller players emerge. And in order to capture greater value, it really requires that you have some of the larger scale, the technology and the efficiencies."

Chesapeake, a company co-founded by the late shale pioneer Aubrey McClendon, was once the country's second-largest natural gas producer. But it has struggled with debt and has sold billions in oil and gas holdings since Mr. Lawler took over in 2013, including a $2 billion deal announced in July to shed its last remaining acreage in Ohio's Utica Shale.

The company's net debt as of the end of the second quarter was $9.2 billion, down from nearly $16 billion in 2012.

Under terms of the deal, WildHorse owners can trade each of their shares in the company for either 5.989 shares of Chesapeake stock or a combination of 5.336 shares of Chesapeake stock and $3 in cash, the companies said in a statement Tuesday. Under deal terms, Chesapeake will assume the value of WildHorse's net debt of $930 million. The companies project $200 million to $280 million in average annual cost savings.

The deal is the latest move toward consolidation in the shale patch as investors push companies to rein in spending. Diamondback Energy Inc. announced a deal in August to acquire Energen Corp. for more than $9 billion, including debt. Concho Resources Inc. agreed in March to buy RSP Permian Inc. for about $9.5 billion.

Chesapeake's acquisition is expected to close in the first half of 2019 and is subject to shareholder approval.

--Micah Maidenberg contributed to this article.

Write to Rebecca Elliott at [e-mail]

(END) Dow Jones Newswires

October 31, 2018 02:47 ET (06:47 GMT)

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