Cabot Oil & Gas and Cimarex Energy Combine in Merger of Equals
NYSE-listed E&P companies Cabot Oil & Gas Corp. and Cimarex Energy Co. have entered into a definitive agreement to combine in an all-stock merger of equals, to form a combined entity that will be worth approximately US$17 billion on an enterprise value basis. The transaction has been unanimously recommended by the Boards of Directors of both companies.
Upon completion, shareholders of Cabot and Cimarex will own 50.5% and 49.5% respectively of the issued and outstanding shares of the combined company. Under the terms of the deal, Cimarex shareholders will receive 4.0146 Cabot shares for each share of Cimarex common stock owned. Based on the exchange ratio and the companies’ closing share prices on May 21, 2021 (the last trading day prior to the transaction announcement), the total combined market capitalization (equity value) amounts to approximately US$14.4 billion. Based on Cabot’s reported negative net debt of approximately US$872.5 million, plus Cimarex’s reported net debt of US$1.5 billion as of March 31, 2021 amounting to a total combined net debt of approximately US$2.3 billion, the implied transaction value is approximately US$17 billion on an enterprise value basis.
The newly-formed entity will operate under a new name and plans to be headquartered in Houston, with operations across the Permian basin (New Mexico and Texas), Mid-Continent (Oklahoma), and the Marcellus shale (Pennsylvania). The pro-forma combined entity is expected to have 733,000 net acres comprising of 234,000 net acres of Permian basin assets, 326,000 net acres of Mid-Continent assets, and 173,000 net acres of Marcellus shale assets, with a combined average daily production of approximately 600 million barrels of oil equivalent per day (Mboe/d).
“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,” said Cabot’s Chairman, President and CEO, Dan O. Dinges.
“With its premier assets, increased resource diversity and a strong financial foundation, the company will be well positioned to deliver long-term value creation for its shareholders and other stakeholders,” he added.
Based in Pennsylvania, Cabot is engaged in the development, exploitation, and exploration of oil & gas properties in the United States, with a primary focus on natural gas operations in the Marcellus Shale in northeast Pennsylvania.
Denver-based Cimarex is engaged in exploration, development and production operations in the Mid-Continent and Permian basin regions of the United States.
JP Morgan Securities is acting as financial advisor to Cabot Oil & Gas, and Tudor Pickering & Holt is acting as financial advisor to Cimarex.
The transaction is subject to customary closing conditions, including the approval of Cabot and Cimarex common shareholders and regulatory clearance, and is expected to close in Q4-2021.