Southwestern Energy Company expanded its operations into the Haynesville with a $1.85 billion acquisition of GEP Haynesville, LLC.
GEP is the third largest private Haynesville producer and the transaction is expected to close by the end of the year. The deal means 700 MMcf a day of production for Southwestern Energy.
It also expands the company’s exposure to the LNG corridor and deepens the firm’s economic inventory with 700 locations across the stacked-pay Haynesville and Middle Bossier. As a result of the acquisition, Southwestern Energy’s estimated 2022 free cash flow per share will improve by 15%.
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 transaction was unanimously approved by each of Southwestern Energy’s and GEP Haynesville’s boards of directors.
“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,” said Bill Way, Southwestern Energy President and CEO. “The transaction adds significant high-return locations to our development inventory while expanding access to premium Gulf Coast markets.”
Once the transaction is closed, the Company will produce approximately 4.7 Bcfe per day. Within Southwestern’s balanced portfolio, approximately 65% of its daily natural gas production will be marketed to growing demand centers along the Gulf Coast, positioning the Company to efficiently capture natural gas price improvement and expand margins.
As of September 30, 2021, the Company had total debt of $4.2 billion. After the financing of the $1.325 billion cash consideration for this transaction, the Company anticipates its year-end 2021 debt balance to be approximately $5.4 billion with a leverage ratio of approximately 2.0x.
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