Two of the largest domestic natural gas producers and leaders in shale production, Chesapeake Energy and Southwestern Energy, have agreed to merge in a $7.4 billion deal. This continues a wave of M&A activity in the energy sector. For 2024, this is expected to continue given that many companies are flush with cash, while valuations are also attractive.

The merger is an all-stock transaction and is expected to close in the second quarter. According to Chesapeake CEO Nick Dell’Osso, the merger will enable them to compete on an international scale and lead to lower costs. The new, combined company will have a new name and a market cap of around $24 billion. It forecasts 15 years of inventory and expects a 20% increase in dividends due to “significant synergies” and an increase in free cash flow generation over the next 5 years. 

Last year, there were a handful of deals in the sector as ExxonMobil bought Pioneer Natural Resources for $60 billion, while Chevron bought Hess for $53 billion. Both companies were looking to boost production capacity. In 2024, analysts are forecasting that major energy producers will be looking to acquire high-quality shale holdings in public and private markets.

Finsum: Chesapeake Energy and Southwestern Energy agreed to a $7.4 billion merger. Analysts are expecting more M&A activity in the sector in the coming year.