Chesapeake Energy’s $7.4 billion merger with Southwestern Energy was delayed by the Federal Trade Commission (FTC), making it the latest large-scale upstream oil and gas deal to undergo more intensive review.

With time running out on the antitrust clock this week, the FTC notified the companies on April 4 that the agency wants more information about the merger, according to April 5 regulatory filings by Chesapeake and Southwestern.

The two companies are the top dual-basin natural gas producers in the Appalachia and Haynesville regions and would control much larger market shares in each.

The upshot is that the merger, which would create the largest U.S. natural gas producer, likely won’t close until the second half of 2024, analysts said.

Upstream deals have faced increased scrutiny as Congressional Democrats have demanded investigations over what they see as anti-competitive consolidation in the oil and gas sector.

The FTC’s issuance of a “Second Request”—until recently, a rarity for upstream deals—extends the waiting period imposed by the Hart-Scott-Rodino Antitrust Improvements Act by 30 days after Southwestern and Chesapeake complied with requests for additional information.

At Hart Energy’s DUG GAS+ Conference and Expo, Josh Viets, Chesapeake executive vice president and COO, said on March 28 that Chesapeake was nearing the end of a 30-day waiting period that would expire this week.

“If you don't receive comments, essentially, you consider yourself to be cleared to be able to move forward with … the closing of the transaction,” he said.

The FTC appears to have waited until the 11th hour to make a second request from the companies.

Chesapeake and Southwestern submitted required antitrust notifications to the FTC and the Department of Justice on Feb. 1, which set a March 4 timeframe for the FTC to request additional information. Viets said Chesapeake remained in a review period past that date after refiling its application for the merger.

“It’s a pretty typical process, they just simply needed more time,” Viets said. “If you follow the news, you know that the FTC has been incredibly busy of late.”

The agency has also filed second request notifications with Chevron and Hess Corp. related to a $53 billion merger as well as Exxon Mobil and Pioneer Natural Resources regarding their $60 billion deal.

While Chesapeake’s deal with Southwestern is relatively smaller at $7.4 billion, the combined company would be a force in the Haynesville and Appalachian basins. JP Morgan estimated the natural gas E&P would control about “21% of Appalachia’s gross production … and about 25% of Haynesville’s gross production.”

UBS analysts said that based on the second request, the timeline for the transaction's close has been pushed out to the second half of the year from the second quarter, according to an April 5 report.

“While a disappointment relative to the initial time frame for the transaction, the arb spread had widened out to >10% on an annualized basis, suggesting there was likelihood of a request coming in,” UBS said in an April 5 report.

UBS said the delay will show what Southwestern’s “volumes trajectory looks like this year on a standalone basis, which we believe will show declines into 1Q24 before having a shallow recovery back towards the 4.6 [Bcfe/d] level in 1Q25. We continue to see the transaction as positive for CHK, but remain Neutral based on our natural gas views.”

During Chesapeake’s Feb. 21 earnings call, an analyst posited to CEO Nick Dell'Osso that a second request from the FTC was likely.

Dell’Osso said Chesapeake had a tremendous amount of work ahead to integrate Southwestern, with teams set up to work through the organizational structure.

“We will be ready for a quick close,” he said. “We can continue to work on things from an integration standpoint. If it takes longer, we won't let that distract us or bother us in any way. We're well into the work required for a successful integration.”

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