Shale Consolidation: Southwestern Energy Acquiring Haynesville Producer
The deal is expected to bolster Southwestern's annual production to more than 4 Bcf/D.
US tight-gas producer Southwestern Energy is acquiring smaller rival Indigo Natural Resources in a deal valued at about $2.7 billion. Houston-area based Southwestern said on Wednesday that the acquisition will add to its portfolio nearly 149,000 acres in the gas-rich Haynesville and Bossier shale formations in northern Louisiana.
Indigo operates 330 producing wells and holds more than 1,000 future drilling locations, according to corporate reports. The properties are expected to average 1.1 Bcf/D for the year and proven reserves in 2020 were estimated to be 3.1 Tcf.
The area serves as the major supply hub for liquified natural gas (LNG) plants and industrial markets along the US Gulf Coast. Southwestern noted in its announcement that the acquisition will give it more direct access to growing LNG markets.
The deal includes $400 million in cash, $700 million in bonds, and an estimated $1.6 billion in Southwestern stock. The companies expect the transaction to be met with shareholder approval and close by the year’s end.
On a pro forma basis, Southwestern projects it will realize $20 million in general and administrative savings by next year and a 12% increase in overall margin.
Southwestern’s operations today comprise more than 789,000 acres in the Appalachian Basin where the company is on track to produce 3 Bcfe/D. On a pro forma basis, the company’s production is set to top 4 Bcfe/D, about 85% of which is natural gas. Southwestern became the third-largest producer in the region last year when it merged with Montage Resources in an all-stock deal.
Founded in 2006, Indigo is a private-equity-backed producer in Houston that acquired 78,000 acres of its Louisiana position in 2016 from Chesapeake Energy for $450 million. In April, Indigo sold 180,000 net acres in Louisiana and Texas for $135 million to Diversified Gas & Oil.