Chesapeake Energy has entered into a definitive agreement to acquire Vine Energy, an energy company focused on the development of natural gas properties in the over-pressured stacked Haynesville and Mid-Bossier shale plays in northwest Louisiana. The acquisition is a zero premium transaction valued at approximately $2.2 billion, based on a 30-day average exchange ratio as of Tuesday’s close, equating to $15.00 per share.
“This transaction strengthens Chesapeake’s competitive position, meaningfully increasing our free cash flow outlook and deepening our inventory of premium gas locations, while preserving the strength of our balance sheet. By consolidating the Haynesville, Chesapeake has the scale and operating expertise to quickly become the dominant supplier of responsibly sourced gas to premium markets in the Gulf Coast and abroad,” said Mike Wichterich, Chesapeake’s Board Chairman and Interim CEO.
The deal will increase Chesapeake’s cumulative five-year free cash flow outlook by approximately $1.5 billion, or 68% of the transaction value, to approximately $6.0 billion, or 66% of pro forma enterprise value. The company will see approximately $50 million in average annual savings expected from operating and capital synergies
Vine shareholders will receive fixed consideration of 0.2486 shares of Chesapeake common stock plus $1.20 cash per share of Vine common stock, for total consideration of $15.00 per share, comprising of 92% stock and 8% cash.
“We firmly believe that the quality of our assets, combined with the scale, depth and diversity of Chesapeake’s portfolio and our shared unwavering commitment to ESG excellence, provides significant opportunity to accelerate the return of capital to our combined shareholders,” said Eric Marsh, Vine’s Chairman, President and CEO.
Pending the successful closing of the transaction in the Q4 2021, Chesapeake’s preliminary plan is to operate 10 to 12 rigs in 2022, with 8 to 9 rigs focused on its gas portfolio and 2 to 3 rigs concentrating on its oil assets. The company will maintain its commitment to a disciplined capital reinvestment strategy, anticipating a 2022 reinvestment rate of 50-60%. At NYMEX strip pricing as of 30 July, this preliminary capital program is anticipated to generate between $2.55 billion to $2.75 billion in total adjusted EBITDAX. Chesapeake also anticipates this preliminary capital program will result in its average annual 2022 oil production remaining flat from Q4 2021 average levels.