Expand Energy: Chesapeake’s Bankruptcy to Largest Gas Producer in US

Chesapeake Energy’s $7.4 billion merger with Southwestern Energy closed on Oct. 1, ending a push-pull dynamic with federal regulators that delayed the deal by a quarter. The newly dubbed Expand Energy is now trading on the Nasdaq with the ticker symbol “EXE.”

The two natural gas players said they had cleared the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in late September. Expand Energy will become the largest gas producer in the U.S. with its massive dual footprints in both the Appalachia and Haynesville shale plays.

The all-stock acquisition of Southwestern by Chesapeake was first announced in January; Chesapeake exchanged Southwestern shares on a 0.0867:1 basis, but additional scrutiny and information requests by the U.S. Federal Trade Commission caused some delays. The new Expand name was only announced in late September.

“The world is short energy,” said Chesapeake CEO Nick Dell’Osso, who will lead the combined company, in a statement. “With a premium scaled position across leading natural gas basins in the United States, a peer-leading returns program and a resilient financial foundation, Expand Energy is uniquely positioned to compete on an international scale to expand America’s energy reach and deliver opportunity for the world’s energy customers.”

While natural gas prices remain relatively low, Dell’Osso and many industry analysts are bullish on prices returning to healthy levels going forward with the rise of LNG demand as new exporting facilities come online, as well as from the rise of domestic demand in the Americas from the growth of data centers, infrastructure electrification and more.

Expand will maintain Chesapeake’s Oklahoma City headquarters and keep a presence in the Houston area.

Meanwhile, analysts are looking ahead to the third-quarter reporting period in which more guidance on integration should illuminate the go-forward planning.

At Jefferies, analyst Lloyd Bryne said Expand is “positioned as a must-own U.S. natural gas player” with strong, complementary acreage in the Haynesville Shale and Appalachia Basin holding at least 15 years’ worth of inventory that should product strong free cash growth and shareholder returns.

“Market focus will likely remain on [Southwestern] integration and execution with higher-than-expected synergies, timely debt reduction, higher share buybacks and continued progress toward LNG strategy, all acting as key upside catalysts,” he said in an October note to investors.    

There was a time during the tumultuous story of Expand’s forebear, Chesapeake, that it, itself, was a “must-own” natural gas producer.

Founded in 1989 by Aubrey McClendon and Tom Ward—both 29—with about 10 employees and $50,000, the Chesapeake story is one of epic proportions. The company went public within four years valued at $25 million, and the stock price soared.

But as all things cyclical in the energy space go, natural gas prices collapsed in the late 1990s and weighed down the company’s stock.

And then, Chesapeake expanded.

A multibillion-dollar spending spree to build an enormous U.S. footprint ranked Chesapeake second only to Exxon for natural gas production in 2005. At one point, Chesapeake owned rights to 16 million acres. More than 1,700 employees worked at the company that year, according to The Oklahoman.

The following year, Ward resigned. Today, he is CEO of Mach Natural Resources.  

In 2008, amid economic collapse, the enigmatic McClendon sold off most of his Chesapeake stock. Four years later, the board of directors announced a review of McClendon’s financial dealings. In 2013, he left Chesapeake following a shareholder revolt. McClendon founded another company, American Energy Partners, but it struggled in the low commodity price environment. On March 1, 2016, McClendon was indicted by a federal grand jury for alleged conspiracy to suppress bids on oil and natural gas leases. He vowed to fight the charges. McClendon died the following day in a single vehicle crash on a two-lane highway in Oklahoma City, his hometown.

A series of CEOs have worked to revive Chesapeake. Archie Dunham, the former CEO of ConocoPhillips, replaced McClendon. Later, Doug Lawler took the company into the South Texas Eagle Ford Shale to make a try for oil. Dell’Osso was appointed president and CEO in October 2021, the same year Chesapeake emerged from bankruptcy.

Dell’Osso, previously the firm’s CFO, said at the time, “I am confident Chesapeake’s best days lie ahead of us and look forward to working tirelessly with my colleagues to generate and return to our shareholders sustainable free cash flow while aggressively lowering our emissions profile.”

He sold off the more recently acquired oily assets and reset the company’s sites on natural gas, in part based on a large Haynesville purchase. Dell’Osso was Chesapeake’s fourth and final CEO. 

Expand Energy was prepared to rebrand upon closing in October. A new website touts the company’s responsible development and sustainability commitment.