XEC - Cabot Oil & Gas to merge with Cimarex Energy: Here are the details
Cabot Oil & Gas Corporation ( NYSE: COG ) said on Monday it will merge with Cimarex Energy Co ( NYSE: XEC ), forming a new oil and gas producer in the United States worth about $17 billion (£12 billion).
Cabot shares tanked over 3% in premarket trading on Monday and lost another 3% on market open to trade at $16.66 per share that matches the price at which the stock started the year 2021.
The deal will result in cost savings for both companies
The deal is expected to close later this year in the fourth quarter. In the joint statement on Monday, the two companies highlighted that it will take eighteen months for the merger to cut annual costs (general and administrative) by $100 million each.
From 2022 to 2024, the combined company forecasts roughly $4.7 billion of free cash flow, assuming U.S. oil prices at $55 per barrel and gas prices at $2.75 per million British thermal unit (Btu). At the time of writing, oil prices stand at $64.5 per barrel that represents a 33% increase in 2021 to date. At $2.85 per million btu, gas prices are now up 13% this year.
The deal will merge about 173,000 net acres that Cabot owns in Pennsylvania’s Marcellus shale and 560,000 net acres that Cimarex has in Oklahoma’s Anadarko and Texas’s prolific Permian basins.
The news comes only weeks after EQT Corp said it will buy Alta Resources and a month after Pioneer Natural Resources signed an agreement to acquire DoublePoint Energy for $6.4 billion.
Cimarex shareholders to own 50.5% of the joint company
For each share of Cimarex, its shareholders will get 4.0146 shares of Cabot that translates to a per-share offer value of $71.50 – an under 1% premium on the price at which Cimarex closed the regular session on Friday.
Upon completing the merger, Cabot stockholders will own about 49.5% of the new company, while the remaining 50.5% will go to Cimarex shareholders. Cimarex’s current CEO Thomas Jorden will head the joint firm, while Cabot’s CEO Dan Dinges will take on the role of executive chair of the board.
Cimarex opened roughly 4% down in the stock market on Monday. In the next hour, shares of the company lost another 7% to trade at $63.66 per share versus $38.75 per share at the start of 2021. At the time of writing, Cimarex is valued at $6.85 billion.
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