Cabot Oil & Gas Corp and Cimarex Energy Co, two oil and gas producers, announced on Monday that they would merge to create a group with an enterprise value of about $17 billion, the latest in a sector that has recovered one of its worst downturns. Cabot’s 173,000 net acres in Pennsylvania’s Marcellus shale and Cimarex’s 560,000 net acres in Texas’ Permian and Oklahoma’s Anadarko basins will be combined in the transaction.
It comes after EQT Corp agreed to buy rival Alta Resources in the Appalachian basin earlier this month, and Pioneer Natural Resources decided to buy privately-held rival DoublePoint Energy for $6.4 billion in April. Cabot and Cimarex Energy plan to save $100 million a year in general and administrative costs starting 18 months to two years after the transaction closes, expected in the fourth quarter.
For each Cimarex share held, shareholders will receive 4.0146 shares of Cabot common stock. According to Reuters calculations, this translates to a $71.50 per share offer, a less than 1% premium to Cimarex’s Friday close. Cabot shareholders will own 49.5 percent of the merged group, while Cimarex shareholders will own 50.5 percent. Dan Dinges, the CEO of Cabot, will act as executive chair of the board, while Thomas Jorden, the CEO of Cimarex Energy, will lead the merged business.
Cabot’s current chief financial officer, Scott Schroeder, will lead the merged company’s financial operations. The merged business will be based in Houston and will operate under a new name. Each company will have five directors on the board.