By: Reuters – Cabot Oil & Gas Corp (COG.N) and Cimarex Energy Co (XEC.N) on Monday agreed to merge to form a U.S. oil and gas producer with an enterprise value of about $17 billion, the latest deal in a sector rebounding from one of its worst downturns.
The deal frenzy reflects hopes to ride a recovery in oil and gas prices as fuel demand picks up from pandemic lows, while also allowing for savings by eliminating cost duplication.
The companies expect to save $100 million in annual general and administrative costs, beginning within 18 months to two years following the deal closing, set for the fourth quarter.
The combined company expects to support its free cash flow outlook of about $4.7 billion from 2022 to 2024 at $55 per barrel of U.S. oil prices and $2.75 per million British thermal unit. Oil prices were trading at $64.5 a barrel, up about 33% this year, while gas price have gained 13% to $2.85 per million British thermal unit.
The deal will combine Cabot’s about 173,000 net acres in Pennsylvania’s Marcellus shale and Cimarex’s 560,000 net acres in Texas’s prolific Permian and Oklahoma’s Anadarko basins.
It follows EQT Corp’s (EQT.N) deal to buy Appalachian basin rival Alta Resources earlier this month and Pioneer Natural Resources (PXD.N) agreeing in April to buy privately-held DoublePoint Energy for $6.4 billion.
Cimarex shareholders will receive 4.0146 shares of Cabot common stock for each Cimarex share owned. That implies an offer value of $71.50 per share, a less than 1% premium to Cimarex’s Friday close, according to Reuters calculations.
Cabot shareholders will hold about 49.5% and Cimarex shareholders will own about 50.5% of the combined company.
Cabot Chief Executive Officer Dan Dinges will serve as executive chair of the board, while Cimarex boss Thomas Jorden will lead the combined company as CEO.