Chesapeake Energy Corp., Oklahoma City, has agreed to acquire WildHorse Resource Development Corp. in a $4-billion deal, including net debt of $930 million.
Complimenting Chesapeake’s existing high margin Eagle Ford and Powder River basin positions, the deal adds 420,000 high margin net acres, 80-85% of which are undeveloped, in the Eagle Ford shale and Austin Chalk formations with a focus on Burleson County, Tex., with access to Gulf Coast markets. Net production in this year’s second quarter on the properties was 46,700 boe/d (72% oil), Capital One Securities analysts said in a note Oct. 30.
Earlier this year, WildHorse transitioned to a pure-play Eagle Ford producer with oil representing 70% of its production in 2018 (OGJ Online, Feb. 12, 2018).
According to Chesapeake, more than 80% of future drilling and completions are expected to be directed toward high-margin oil opportunities. In its third quarter report released Oct. 30, the company noted plans to add a fifth rig in the Eagle Ford in 2019, as the company “continues to delineate additional opportunities in the Upper Eagle Ford and the Austin Chalk formations.”
Adjusted oil production is expected to double by 2020 from stand-alone adjusted 2018 estimates, increasing to a projected 125,000-130,000 b/d of oil in 2019, and 160,000-170,000 b/d of oil in 2020. Chesapeake’s 2020 projected adjusted oil production mix is expected to increase to 30% of total production from its current 19%.
"As a highly regarded operator, Chesapeake brings the technical expertise and operational efficiencies needed to maximize the value of this premier asset,” said WildHorse Chairman and Chief Executive Officer Jay Graham.
By 2023, Chesapeake projects $1-1.5 billion in savings from operational and capital efficiencies.
Prior to closing—subject to shareholder approvals and customary conditions and expected in first-half 2019—WildHorse will designate two individuals for Chesapeake’s board. R. Brad Martin and Doug Lawler will continue to serve as Chesapeake’s chairman and president, and chief executive officer and director, respectively.
Upon closing, Chesapeake shareholders will own 55% of the combine, and WildHorse shareholders will own 45%.
Chesapeake expects to finance the cash portion of the transaction—expected to be $275-400 million—through its revolving credit facility.
