Southwestern to buy natural gas producer GEP Haynesville for $1.85 billion

(Reuters) -Southwestern Energy Co on Thursday agreed to buy Blackstone-backed GeoSouthern’s assets in the Haynesville for about $1.85 billion, betting on rising gas prices and the field’s proximity to the growing U.S. Gulf Coast export hub.

Producers have been consolidating in the U.S. shale as oil and natural gas prices recover from last year’s pandemic blow to trade at multi-year highs this month.

U.S. gas prices recently touched 12-year highs and prices have skyrocketed in Europe and Asia, where buyers are desperate to lock down supply to deal with growing needs for power.

The deal will help Southwestern in the Haynesville by adding production of about 700 million cubic feet of gas per day and expanding its exposure to the U.S. Gulf Coast export hub as global demand for gas has been booming.

Southwestern, which has been rapidly seeking to expand its footprint, in September acquired Indigo Natural Resources for $2.7 billion and in last November bought Appalachian peer Montage Resources for about $865 million.

Mergers and acquisitions among gas producers have been heating up. Chesapeake Energy agreed to buy Vine Energy Inc for $615 million earlier this year, while EQT Corp said it would buy Appalachian rival Alta Resources for $2.93 billion.

The total consideration for GEP Haynesville includes $1.33 billion in cash and about $525 million in Southwestern shares.

Southwestern said the deal is expected to immediately add to margins, returns and key per-share metrics as well as boost its 2022 free cash flow per share by 15%.

The deal is also expected to provide $25 million of immediate annual cost savings.

GEP Haynesville LLC is a joint venture formed by GeoSouthern Haynesville and a Woodlands, Texas-based private-equity firm.

The venture acquired land in the Louisiana portion of the Haynesville basin from Encana Corp – now known as Ovintiv Inc – for about $850 million in 2015.

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