United States’ Chesapeake Energy has bought Houston-based player WildHorse Resource Development in a deal worth US$3.98 billion, helping it gain foothold in Eagle Ford Shale and Austin Chalk formations in southeast Texas.
The acquisition includes WildHorse's net debt of $930 million as of June 30, 2018.
At the election of each WildHorse common shareholder, the consideration will consist of either 5.989 shares of Chesapeake common stock or a combination of 5.336 shares of Chesapeake common stock and $3 in cash, in exchange for each share of WildHorse common stock, the company said.
The acquisition of WildHorse expands Chesapeake's oil growth platform and accelerates progress toward its strategic and financial goals of enhancing margins, achieving sustainable free cash flow generation, and reducing net debt to EBITDA ratio.
Doug Lawler, Chesapeake's president and CEO said: "This transaction accelerates Chesapeake's strategic plan and expands the value-creation opportunities for our shareholders by adding a premier asset at an attractive valuation, significantly boosting oil production, EBITDA margins and cash flow growth, while improving our leverage metrics. The addition of WildHorse, together with our substantial growth profile in the Powder River Basin, advances our transformation into a highly competitive company with a diverse portfolio of high-quality assets, a stronger balance sheet and meaningful oil-growth potential."
Jay Graham, CEO and chairman of the board of directors of WildHorse Resource Development said, "We are extremely proud of the company we built and brought public less than two years ago. This combination creates an impressive oil growth platform which provides both immediate value and potential for significant long-term upside to our shareholders. As a highly regarded operator, Chesapeake brings the technical expertise and operational efficiencies needed to maximise the value of this premier asset."
Upon closing, Chesapeake shareholders will own approximately 55 per cent of the combined company, and WildHorse shareholders will own approximately 45 per cent, depending on the consideration elected. Prior to closing, WildHorse will designate two individuals, presently expected to be Jay Graham and current WildHorse Director David Hayes to be added to Chesapeake's Board of Directors. R. Brad Martin and Doug Lawler will continue to serve as Chesapeake's chairman of the Board of Directors and president, CEO and director, respectively.