Houston driller acquired by shale pioneer
Chesapeake getting Wildhorse for $3B
The shale drilling pioneer Chesapeake Energy said Tuesday it is acquiring Houston’s WildHorse Resource Development for $3 billion in cash and stock in a consolidation of players in South Texas’ Eagle Ford Shale.
Chesapeake of Oklahomas City is scooping up WildHorse, which exclusively focused on exploration and production in the emerging northeastern corner of the Eagle Ford west of College Station. In addition to its 420,000 acres in the region, WildHorse is about to open a sand mine in the area to service its hydraulic fracturing, or fracking, of wells.
The deal combines two top Eagle Ford production companies, diversifying the holdings of Chesapeake, which is primarily focused in the southwestern portion of the shale play south of San Antonio. Chesapeake also is growing in Wyoming’s Power River Basin along with its Marcellus Shale position in Pennsylvania.
Historically a natural gas company, Chesapeake has aimed to expand into higher-value crude oil assets that are ripe for development, and WildHorse proved a prime acquisition target as a pureplay Eagle Ford company with a large block of mostly contiguous acreage. The northeastern Eagle Ford, which is underdeveloped, holds more oil as opposed to natural gas, said David Heikkinen, chief executive and analyst with Heikkinen Energy Advisors in Houston.
“I’d call it an emerging region,” Heikkinen said. “WildHorse has gone out and pioneered this region.”
Eagle Ford oil arguably sells at the highest prices in the country because of its proximity to refining and port hubs in Houston and Corpus Christi, while the booming Permian Basin in West Texas is facing pricing discounts because of pipeline shortages.
Chesapeake Executive Vice President Frank Patterson said the WildHorse acreage is more than 80 percent undeveloped, providing lots of room for growth. Chesapeake will use larger rigs than those deployed by WildHorse to drill longer hori-
zontal wells and to do so more quickly.
“It’s a very quick transition to a full field development plan,” Patterson said. “We’ll hit the ground running.”
The sale will primarily come in stock, giving WildHorse shareholders about 45 percent of the expanded Chesapeake. The Oklahoma producer also will pay up to $400 million in cash and take on nearly $1 billion in WildHorse debt. WildHorse will gain two seats on the Chesapeake board, including one for WildHorse CEO Jay Graham.
The deal is expected to close in the first half of next year.
By making it a mostly stock deal, Chesapeake will limit the increase to its almost $10 billion debt load with the hope that the new oil field holdings will start generating cash quickly. Chesapeake also just sold its Utica shale assets in Ohio for $2 billion to a Houston energy startup funded by Canada’s pension investment board called Encino Acquisition Partners. Natural gas production dominates the Utica Shale.
WildHorse, which employs almost 200 people in Houston and Burleson County combined, went public just two years ago, and quickly worked to grow and consolidate its position in the northeastern Eagle Ford. Natural Gas Partners of Irving was WildHorse’s top private equity financial backer, and now the firm will become a top Chesapeake shareholder.
Graham co-founded WildHorse and led the company through its initial public offering in 2016 after he helped sell his previous company, Memorial Resource Development, to Fort Worth-based Range Resources.