U.S. shale gas is on sight of Oklahoma-based company Chesapeak energy, as it has purchased Louisiana natural gas rival Vine Energy Inc, for $615 million; the company is betting on Vine Energy’s proximity to the U.S. Gulf Coast export hub.
Firstly, as we have reported previously, natural gas prices are up for good; only this year they have rebounded due to the vaccine-driven economic recovery. Specifically, U.S. features were up about 1.44% on Wednesday at $69.27 a barrel, an increase of about 63% from year-ago levels, according to Reuters.
Secondly, driven by this price increases company are pitching scale as a way to further cut costs; for example, top gas producer EQT Cor, recently agreed to buy Appalachian rival Alta Resources for $2.93 billion; also, Southwestern Energy is purchasing privately held Indigo Natural Resources for about $2.7 billion.
Thirdly, the Chesapeake transaction considers an offer of 0.2486 share; and $1.20 in cash for each stock of Vine, implying a per-share value of $15. That represents a less than 1% premium to Vine’s last close of $14.88.
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U.S. shale assets of Chesapeake may be sold
Moreover, after the news broke, Shares of Vine were up 2.15% on Wednesday at $15.20 and Chesapeake was up 2.4% at $56.81; according to Reuters. Worth noting, Chesapeake fell into bankruptcy last year; after years of overspending on acquisitions that left it burdened with debt and short on cash.
About such matters, Interim Chief Executive Mike Wichterich, assured investors on Wednesday that he was not overpaying for Vine; he stressed that his company was “no longer the Chesapeake of the past.” And he also remarked. “We have a super-stable balance sheet.” He said in an interview with Reuters. “There is a tone that is a little different and attitude that is a little different.”
On the other hand, the total enterprise value of the purchase is about $2,2 billion; it will immediately increase Chesapeake’s cash flow; and will also generate $50 million in average annual savings, the company said. The deal will more than double its gas output from the Haynesville shale field in Louisiana, it also remarked.
Finally, the company will continue to push the production of other U.S. shale assets; like the ones in the Powder River Basin; and also their Texas shale assets; which were on sale earlier this year, as Reuters reports. If assets wont peak, they will truly be sold, executive from the company said.
