Transaction Details: 

Southwestern Energy is expanding it's Haynesville footprint after acquiring Indigo in June 2021 for $2.7 billion.

Today the company announced that it is acquiring the 3rd private Haynesville producer & PE-backed– GEP Haynesville for approximately $1.85 billion.

This deal closed on December 31, 2021.

The transaction is expected to close by year-end 2021.   GeoSouthern Haynesville initially acquired the land from the property from Ovintiv (originally known as Encana) back in August 2015.

As natural gas prices surge, we are seeing more deal in gas basins like the Haynesville.    So far this year, we have seen $4.4 billion in deal value in the Haynesville

Natural Gas Prices

Transaction Summary

• Production: 700 MMcfe/d

• Location: 700

• Proved Reserve: 2.2 Tcfe

• Purchase Price: $1.32 billion Cash + $525 million in stock

• Land: 120,000 net acres

• Producing wells: 400

Location Map

Transaction highlights include:

• Builds further scale in the Haynesville with approximately 700 MMcf per day of production; total Company production of approximately 4.7 Bcfe per day pro forma;
• Expands exposure to the LNG corridor and growing demand centers along the Gulf Coast;
• Further deepens economic inventory with 700 locations across stacked-pay Haynesville and Middle Bossier;
• Adds 2.2 Tcfe of estimated year-end 2021 proved reserves at projected SEC pricing¹; expected year-end 2021 total proved reserves approximately 20.9 Tcfe;
• Attractive valuation; implied transaction multiple of 2.9x estimated 2022 EBITDA;
• Projected pro forma free cash flow approximately $2.3 billion in 2022 – 2023;
• Disciplined financing minimizes equity dilution while preserving financial strength;
• Maintains pathway to achieving sustainable leverage target range of 1.0x to 1.5x by year-end 2022; and
• Execution of strategic hedging plan in current price environment.

“This strategic move positions Southwestern as the largest producer in the Haynesville and enhances our leading presence in the top two premier natural gas basins in the US. The Company’s increased scale from both a reserves and production perspective is expected to deliver higher margins, enhanced economic returns and improved per-share cash flow metrics. The transaction adds significant high-return locations to our development inventory while expanding access to premium Gulf Coast markets,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Way continued, “This transaction reflects the Company’s strict adherence to our rigorous acquisition framework and will build on our leading execution in the integration and development of large scale assets. The financing and hedging strategy for the deal aligns with our commitment to financial strength and disciplined enterprise risk management. Combined with our other strategic actions, this transaction further expands the sustainable value being generated for our shareholders.”

Transaction and Timing

The total consideration of $1.85 billion will be comprised of $1.325 billion in cash and approximately $525 million in Southwestern common shares.

The stock consideration consists of approximately 99 million shares of Southwestern Energy common stock, calculated utilizing the 30-day volume-weighted average price of $5.285 as of November 2, 2021.

The Company expects to finance the $1.325 billion cash consideration in a manner that affords near-term and efficient debt reduction, extends its maturity runway and lowers its cost of debt.

The acquisition valuation compares favorably to other recent natural gas transactions, with the $1.85 billion purchase price representing 2.9x estimated 2022 EBITDA using a $4 per Mcf NYMEX Henry Hub price, which is below today’s strip prices.

Advisors

Goldman Sachs & Co. LLC served as the exclusive strategic advisor to Southwestern. JP Morgan, Bank of America, Citigroup, RBC and Wells Fargo served as financing advisors and provided $1.325 billion committed financing in connection with the transaction. Intrepid Partners, LLC also provided a fairness opinion to Southwestern. Credit Suisse Securities (USA) LLC served as the exclusive strategic and financial advisor to GEP. Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to Southwestern, and Kirkland & Ellis LLP served as legal advisor to GEP.

Ark-La-Tex Deal Activity In Last 12 Months