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High Profile Merger Creates A New $17 Billion Shale Giant

Cabot Oil & Gas Corporation and Cimarex Energy announced on Monday another merger in the U.S. shale patch in an all-stock merger of equals that would result in a company with a total enterprise value of around $17 billion.

Cabot’s approximately 173,000 net acres in the Marcellus Shale will combine with Cimarex’s some 560,000 net acres in the Permian and Anadarko basins in a company with a multi-decade inventory of high-return development locations in the premier oil and natural gas basins in the United States, the companies said in a joint statement today.

Cabot’s assets sit in the most productive areas of the premier U.S. gas basin, which Cimarex’s assets are located in the most productive areas in the premier U.S. oil basin, the companies said in the presentation.

The new company’s low-cost and capital-efficient inventory is expected to support cumulative free cash flow of around $4.7 billion from 2022 to 2024 based on $55 per barrel WTI oil prices and $2.75 per MMBtu NYMEX natural gas prices.

The new business plans to distributed base dividends, variable dividends, and special dividends in order to boost return to shareholders, in line with the most recent trend in the U.S. shale patch. 

The combined business will operate under a new name and plans to be headquartered in Houston and keep its regional offices, the companies said.

The merger 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.

“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, said in the statement.

Cabot and Cimarex are the latest to announce a merger in the U.S. shale patch as consolidation started to accelerate late last year after companies shook off the worst of the oil price downturn. Just last week, Bonanza Creek Energy and Extraction Oil & Gas announced their merger in an all-stock deal of $2.6 billion, forming one of Colorado’s largest oil and gas drillers.

By Tsvetana Paraskova for Oilprice.com

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