Corporate M&A

Southwestern Acquires Indigo Natural Resources

By Sakshi Jain
June 01, 2021
2 minutes read
Gas Flare

NYSE-Listed Southwestern Energy Co. has entered into a definitive merger agreement to acquire privately-held Indigo Natural Resources LLC for a total consideration of approximately US$2.7 billion, payable in cash, stock, and the assumption of debt. The transaction has been unanimously approved by board of directors of both companies.

Under the terms of the deal, Southwestern will acquire 100% of the membership interests of Indigo in exchange for an initial cash consideration of US$400 million, plus an additional US$1.6 billion payable via the issuance of Southwestern common stock. In addition, Southwestern will also assume approximately US$700 million of senior notes due 2029, resulting in an implied total transaction value of approximately US$2.7 billion on an enterprise value basis.

Indigo is focused on natural gas production from the Haynesville shale, Bossier shale and Holly Vaughn formations in north Louisiana. In addition, the company owns 50% of M5 Louisiana Gathering LLC, which owns gathering pipelines and processing facilities in the core of company’s acreage. Total proved developed (1P) reserves attributable to the company’s assets is 3.1 trillion cubic feet of gas (Tcf) as of December 31st, 2020, with current average daily production of approximately 1.0 billion cubic feet per day (Bcf/d).

Houston-based Southwestern is engaged in the development and production of oil and natural gas assets in the Appalachian basin in Pennsylvania and West Virginia.

Pro forma, the combined entity will own around 1,064,218 net acres of properties, including approximately 789,218 net acres in the Appalachia basin in Pennsylvania and West Virginia, approximately 149,000 net acres in Haynesville shale, and around 126,000 net acres in Bossier shale in Louisiana.

“Today we are proud to announce another accretive transaction that will benefit the Company’s shareholders for years to come. This acquisition enhances Southwestern’s position as a leading natural gas producer and aligns with our disciplined strategy to generate free cash flow, enhance our balance sheet, optimize performance and build scale. Indigo has done a terrific job building its business, and its balance sheet strength, low cost structure and high-quality acreage position in the core of the Haynesville play accelerates the delivery of our strategic goals. Our footprint now extends across the two premier natural gas basins in the country and includes top-tier dry gas and liquids rich inventory,” said Bill Way, President & CEO of Southwestern.

Goldman Sachs acted as financial advisor to Southwestern, while Credit Suisse advised Indigo on the deal.

The transaction is subject to customary closing conditions, including approval by Southwestern Energy’s shareholders, and is expected to be completed early in Q4-2021.

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