Southwestern Energy Company has reached a $2.7 billion deal to acquire Houston-based natural gas production company Indigo Natural Resources, LLC.
The deal, expected to close in the fourth quarter, is comprised of $400 million in cash, $1.6 billion in SWN common stock and $700 million in assumed debt, the companies announced June 2.
Indigo is a dry-gas producer in the Haynesville Shale, which is located in Louisiana and Texas. Southwestern is focused on the Marcellus Shale, the Utica and the Upper Devonian reservoirs in Pennsylvania, West Virginia and Ohio.
“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 Southwestern CEO Bill Way.
Southwestern anticipates the deal will increase its free cashflow and accelerate its debt reduction plans. It should add 4 billion cubic feet equivalent per day of net production and nearly double the company’s free cashflow expectations for 2022 to $470 million, Way said on a conference call with investors.
The deal, subject to approval from Southwestern's shareholders, is also expected to bring $20 million in general and administrative cost savings.
Southwestern expects to continue investing in its portfolio at levels just sufficient to maintain its existing operations in 2022, the company said. It plans to run four drilling rigs on the new acreage in 2022.
This isn't the first acquisition Southwestern has done in recent months. It also acquired Montage Resources, another Marcellus-focused producer, in November.
Goldman Sachs & Co. LLC served as the exclusive financial adviser to Southwestern, and Skadden, Arps, Slate, Meagher & Flom LLP served as legal adviser. Credit Suisse Securities (USA) LLC served as the exclusive financial adviser to Indigo, and Kirkland & Ellis LLP served as Indigo's legal adviser.
