Influential proxy advisory firm Glass Lewis has recommended that shareholders of both Cabot Oil & Gas Corp. and Cimarex Energy Co. vote to support their proposed merger, according to statements seen by Reuters on Sept. 14.
The backing of Glass Lewis will be regarded as a positive for both parties on the transaction. Many shareholders follow the advice of proxy firms when deciding on how to cast their votes at shareholder meetings.
Both sets of shareholders are due to convene on Sept. 29 to vote on the potential merger, which was initially announced in May. The combination was seen as a surprise, given most recent oil and gas mergers have been between companies with overlapping footprints, but this deal brings together Cabot’s gas-rich Marcellus shale positions in the U.S. northeast and Cimarex’s oil-heavy acres within the Permian Basin in West Texas.
“Despite the difference in the strategic rationale underpinning the proposed merger versus other recent exploration and production deals, we find the combination of Cabot and Cimarex is predicated on achieving the same financial objectives as other E&P mergers: generating increased free cash flow and greater returns of capital for investors,” said the report to Cabot shareholders.
Glass Lewis noted that having a balance of both oil and gas production would benefit both Cabot and Cimarex, providing a more stable outlook for its financial performance: important as energy production companies weigh changing dynamics in their industry, including from pressures related to ESG concerns.
Despite slumping in the wake of the merger announcement, the stock of both Cabot and Cimarex has rallied in recent weeks and now trade above their levels on May 21, the session before the deal was revealed. Performance has been aided by natural gas prices soaring to their highest level since 2014.
Cabot and Cimarex shares were down 1.6% and 1.4% respectively in late-morning trading, amid a wider decline of U.S. energy producers.
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