Chesapeake Energy Corporation agrees to acquire Texan oil and gas company WildHorse

Chesapeake Energy Corporation and WildHorse Resource Development Corporation have jointly announced that Chesapeake has entered into a definitive agreement to acquire WildHorse, an oil and gas company with operations in the Eagle Ford Shale and Austin Chalk formations in southeast Texas, in a transaction valued at approximately US$3.977 billion, based on the company's closing price on 29 October, including the value of WildHorse's net debt of US$930 million as of 30 June 2018.

At the election of each WildHorse common shareholder, the consideration will consist of either 5.989 shares of Chesapeake common stock or a combination of 5.336 shares of Chesapeake common stock and US$3 in cash, in exchange for each share of WildHorse common stock. The transaction was unanimously approved by the Board of Directors of each company.

The acquisition is projected to double Chesapeake's adjusted oil production to between 125,000 and 130,000 barrels (bbls) of oil per day in 2019, and 160,000 to 170,000 bbls of oil per day in 2020. The company's 2020 projected adjusted oil production mix is expected to increase to approximately 30% of total production, compared to approximately 19% today.

The transaction will also increase projected EBITDA per barrel of oil equivalent (boe) margin by approximately 35% in 2019 and by approximately 50% in 2020, based on current strip prices.

WildHorse​​'s portfolio adds approximately 420,000 high margin net acres, approximately 80 to 85% of which is undeveloped, in the Eagle Ford Shale and Austin Chalkformations with strategic access to premium Gulf Coast markets to Chesapeake's operations. Moving forward, Chesapeake expects over 80% of future drilling and completion activity will be directed toward high-margin oil opportunities.

Chesapeake expects to finance the cash portion of the WildHorse acquisition, which is expected to be between US$275 million and approximately US$400 million, through its revolving credit facility. The transaction, which is subject to shareholder approvals from both companies and customary closing conditions and regulatory approvals, is expected to close in the first half of 2019.

Goldman Sachs & Co. LLC acted as financial advisor, and Wachtell, Lipton, Rosen & Katz and Baker Botts L.L.P. acted as legal counsel to Chesapeake. Tudor, Pickering, Holt & Co., Morgan Stanley & Co. LLC and Guggenheim Securities, LLC acted as financial advisors and Vinson & Elkins LLP and Akin Gump Strauss Hauer & Feld LLP acted as legal counsel to WildHorse and NGP, respectively.