Southwestern Energy Co. (NYSE: SWN) said Dec. 4 it closed the sale of its Fayetteville Shale business in a transaction worth more than $2 billion.
The sale marks Southwestern’s exit from Arkansas and completes the company’s transition to an Appalachian pure-play E&P.
Earlier this year, Flywheel Energy LLC, a private company backed by Kayne Anderson Private Energy Income Funds, agreed to acquire Southwestern’s Fayetteville exploration, production and midstream assets for $1.865 billion in cash. As part of the deal announced in September, Flywheel also agreed to assume about $438 million of future contractual liabilities.
“This strategic transaction represents a further significant step in the transformation of the company,” Bill Way, president and CEO of Southwestern, said in a statement. “We’re now better positioned to leverage our leading technical and operating capabilities to drive greater value from our highly attractive and significant asset base in Appalachia, pay down debt and create even greater financial flexibility.”
Southwestern plans to use proceeds from the Fayetteville sale to pay down debt, buy back stock and accelerate activity in southwest Appalachia in West Virginia.
Specifically, Southwestern will retire $900 million senior notes and the outstanding balance under its revolver, repurchase stock up to the remainder of the company’s $200 million stock buyback program and invest in Appalachia assets over the next two years.
Southwestern said its fourth quarter production guidance will be impacted by a reduction of roughly 19 billion cubic feet (Bcf) resulting from the sale of the Fayetteville operations.
Southwestern’s Fayetteville Shale business comprised 915,000 net acres, 4,033 operated producing wells and associated midstream gathering infrastructure and compression on the Arkansas side of the Arkoma Basin. Proved reserves as of year-end 2017 were 3.7 trillion cubic feet, and production is expected to range between 225 and 230 Bcf in 2019.
Flywheel Energy, the buyer of Southwestern’s Fayetteville Shale business, is a private E&P company formed to acquire and operate large, producing onshore U.S. oil and gas assets with an emphasis on the Rockies and Midcontinent.
The company began as Valorem Energy in early 2017 with backing from the Kayne Anderson Private Energy Income Fund, which Valorem used to acquire interests in the Williston Basin for $285 million. The Flywheel organization continues to retain the Williston assets, according to the company website.
In August 2018, the Kayne Anderson fund committed a second time to the management team with $700 million of equity in the form of the newly-formed Flywheel Energy which was made concurrently with Flywheel’s acquisition of Southwestern’s Fayetteville Shale business.
J.P. Morgan Securities LLC was financial adviser to Southwestern, and Latham & Watkins LLP was the company’s legal adviser for the transaction, which had a July 1 effective date. Houlihan Lokey Capital Inc. also provided certain evaluation services to the company’s board of directors.
Recommended Reading
SCF Acquires Flowchem, Val-Tex and Sealweld
2024-03-04 - Flowchem, Val-Tex and Sealweld were formerly part of Entegris Inc.
Enbridge Closes First Utility Transaction with Dominion for $6.6B
2024-03-07 - Enbridge’s purchase of The East Ohio Gas Co. from Dominion is part of $14 billion in M&A the companies announced in September.
Pembina Cleared to Buy Enbridge's Pipeline, NGL JV Interests for $2.2B
2024-03-19 - Pembina Pipeline received a no-action letter from the Canadian Competition Bureau, meaning that the government will not challenge the company’s acquisition of Enbridge’s interest in a joint venture with the Alliance Pipeline and Aux Sable NGL fractionation facilities.
Global Partners Buys Four Liquid Energy Terminals from Gulf Oil
2024-04-10 - Global Partners initially set out to buy five terminals from Gulf Oil but the purchase of a terminal in Portland was abandoned after antitrust concerns were raised by the FTC and the Maine attorney general.
Tivoli Midstream Buys Southeast Texas Coast Infrastructure
2024-04-29 - Tivoli Midstream acquired the Chocolate Bayou from Ascend Performance Materials, including storage and land for development.