Southwestern, Montage combine to create third largest Appalachia producer

Southwestern Energy Co. has agreed to acquire Montage Resources Corp. in an all-stock transaction to create the third largest producer in Appalachia with expected total equivalent production of 3 bcfe/d.

The deal, valued in an Aug. 12 investor note by Raymond James at $204 million ($857 million including debt), would add 50 bcfe (25% increase pro forma) and nearly 324,500 net acres (a 70% increase comprised of 34,900 net acres in northeast Appalachia and 289,600 net acres in southwest Appalachia) to Southwestern’s portfolio.

Southwestern expects $30 million in annual G&A synergies as well as operational synergies as certain acreage overlaps. 

Montage Resources shareholders will receive 1.8656 shares of Southwestern for each Montage Resources share. The transaction is expected to close in this year’s fourth quarter, subject to customary closing conditions, including approval of Montage Resources shareholders. EnCap, a 39% owner, has agreed to vote in favor of the transaction, according to Raymond James. 

Concurrently, Southwestern has commenced a registered underwritten public offering of 55,000,000 shares of its common stock, with proceeds expected to be used to retire a portion of Montage Resources’ 8.875% senior notes due 2023.

Montage Resources emerged in 2019 when the deal to combine Eclipse Resources and Blue Ridge Mountain Resources closed (OGJ Online, Mar. 1, 2019).