Denver’s Cimarex Energy Co., a firm with heavy exploration efforts in Oklahoma announced Monday it is merging with Houston-based Cabot Oil & Gas Corporation in an all-stock deal worth nearly $17 billion.
Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Cimarex shareholders will receive 4.0146 shares of Cabot common
stock for each share of Cimarex common stock owned. The exchange ratio, together with closing prices for Cabot and Cimarex on May 21, 2021, reflects an enterprise value for the
combined companies of approximately $17 billion.
Once the merger is completed, Cimarex shareholders will own approximately 50.5% on a fully diluted basis while Cabot shareholders will own about 49.5%.
“This transformational merger will combine our top-tier assets and advance our shared focus on delivering superior returns for investors,” said Thomas E. Jorden, Chairman, President and CEO
of Cimarex.
“The combination of Cabot and Cimarex will create a free cash flow focused, diversified energy company with the scale, inventory and financial strength to thrive across commodity price
cycles,” Dan O. Dinges, Chairman, President and CEO of Cabot.
Upon closing, Dinges will serve as Executive Chair of the Board of Directors of the newly combined business and Jorden will lead the company as CEO and will serve on the Board of
Directors.
The merger will result in an operation made up of Cimarex’s nearly 560,000 net acres in the Anadarko and Permian basins and Cabot’s approximately 173,000 net acres in the Marcellus Shale.
Leaders say the combination will mean a multi-decade inventory of high-return development locations in what they feel are premiere oil and natural gas basins in the country.
The company’s lowcost and capital efficient inventory is expected to support a cumulative free cash flow outlook of approximately $4.7 billion of free cash flow from 2022 to 2024 based on
$55 per barrel WTI oil prices and $2.75 per MMBtu NYMEX natural gas prices.
The announcement indicated the leaders believe the merger will result in a combined business that is well positioned to deliver enhanced capital returns to shareholders. The new business is expected to have an annual base dividend of $0.50
per share (representing a forward dividend yield of 2.8%), which is paid quarterly.
The combined business also plans to declare and
pay a $0.50 per share special dividend to all common shareholders of the combined business promptly after the closing of the transaction.
The companies are targeting annual general and administrative cost synergies of $100 million beginning within 18 months to two years. Upon closing, the combined business is anticipated to have pro forma liquidity of $2.2 billion and will target a net debt-to-EBITDAX ratio of less than 1.0x.
Scott Schroeder, Cabot’s current Chief Financial Officer, will serve as CFO of the combined business. The remainder of the company’s leadership team will include executives
from both Cabot and Cimarex.
The Board of Directors of the company will be composed of five directors from the current Cabot Board of Directors, including Dinges, and five directors from the current Cimarex
Board of Directors, including Jorden.
The transaction is expected to close in the fourth quarter of 2021, subject to regulatory clearance, the approval of Cabot and Cimarex common shareholders and the satisfaction of other customary closing conditions.