US Producers Independence and Contango To Combine in $5.7 Billion-Deal
The producers operate conventional and unconventional assets across the US Lower 48 and produced a combined 111,000 BOE/D in the first quarter of 2021.
Independence Energy and Contango Oil & Gas announced today an all-stock merger that will create a company with an estimated enterprise value of almost $5.7 billion. Independence shareholders will own 76% of the combined company which is to be headquartered in Houston. Contango shareholders will own the remainder.
The two companies combined production for the first quarter was approximately 111,000 BOE/D and their combined decline rate for the year is estimated to be 18%. On a pro forma basis, the 2020 booked reserves show a commodity breakdown of 47% oil, 15% natural gas liquids, and 38% natural gas.
Houston-based Independence is owned and managed by private-equity firm KKR’s Energy Real Assets division and operates both conventional and unconventional assets in the Permian Basin, Eagle Ford Shale Rockies, and the Mid-Continent.
Contango is a Fort Worth, Texas-based oil and gas producer with a portfolio that also includes unconventional and conventional assets in the Mid-Continent, Permian, and Rockies areas. It also operates two offshore fields in the Gulf of Mexico. The company is publicly listed on the stock exchange and its biggest shareholder is also its CEO, John Goff, who executed the voting agreement to back the deal.
The companies highlight that the deal will carry over a net debt of $935 million and will result in about $20 million in annual savings as a result of eliminating general and administrative redundancies. The initial board of directors will be filled with two designees from Contango and seven from Independence.
The agreement calls for Independence to merge with the operating company of a new parent company that will be publicly listed upon closing, expected to happen in the third or fourth quarter. Contango will also become a wholly owned subsidiary of the operating company.
David Rockecharlie, the head of KKR Energy Real Assets, will become CEO of the new company while Goff will serve as chairman of the board.