Chesapeake & SWN officially merge to form Expand Energy
Last Monday, Chesapeake (CHK) and Southwestern Energy Company (SWN) officially merged to form Expand Energy (EXE) with a total market cap of $11 billion on Tuesday market close. Valued at $7.4 billion, the all-stock transaction provides the new company with 15 years of inventory as the largest natural gas producer in the lower 48 and significant cost reduction through operational synergies of $400 million. In January of this year, we performed a high-level production evaluation of the Haynesville and Appalachia assets. This week we examined the economics of the deal by evaluating the Appalachia and Haynesville PDP wells and PUD acreage.
As of January 2024, near the time of the transaction, CHK’s assets produced 215 BOD and 6.2 BCFD compared to 980 BOD and 3.4 BCFD from SWN, which combined is roughly 8% of all US natural gas production. Looking at Appalachia’s average cumulative gas production per ft of lateral length over the first 12 months, CHK wells produced 578 mcf/ft while SWN wells produced 358 mcf/ft (Figure 2). This difference in 12-month cumulative gas production per ft is likely driven by CHK wells using 2,342 lbs of proppant/ft on average compared to 1,632 lbs/ft in SWN wells. In the Haynesville, cumulative gas production per ft of lateral length is 678 mcf/ft and 666 mcf/ft for CHK and SWN wells over the first 12 months, respectively, with SWN wells showing a marginally higher 48-month cumulative per ft (Figure 3).
Using Well Economics data within TGS Well Data Analytics and the average projected monthly NYMEX gas price over the next 5 years from the forward curve, we valued SWN’s Appalachia and Haynesville PUD acreage at $1.2 billion and $1.5 billion, respectively. Combined with SWN’s PDP wells, which are forecasted to return $3.6 billion and $1.6 billion for Appalachia and Haynesville, we valued the total deal at $7.9 billion. However, due to recent gas price volatility, it should be noted that 60% of CHK’s production is hedged to reduce against downside risk from short-term price volatility.
Using TGS Well Data Analytics, we were able to quickly profile wells from both entities, evaluate PDP and PUD assets, and validate a gross deal valuation. For more information about TGS Well Data Analytics or to schedule a demo, contact us at WDPSales@tgs.com.
Figure 1. Chesapeake and SWN coverage and production, including oil, gas, and barrels of oil equivalent per day.
Figure 2. (Top Left): Total gas production comparison of Appalachia assets since 2019; (Top Right): Normalized production comparison of mcf/ft of lateral length; (Bottom Left): Lateral length vs. cumulative mcf/ft of lateral length; (Bottom Right): Proppant Amount (lbs/ft) of lateral length vs. cumulative mcf/ft of lateral length.
Figure 3. (Top Left): Total gas production comparison of Haynesville assets since 2019; (Top Right): Normalized production comparison of mcf/ft of lateral length; (Bottom Left): Lateral length vs. cumulative mcf/ft of lateral length; (Bottom Right): Proppant Amount (lbs/ft) of lateral length vs. cumulative mcf/ft of lateral length.
