Cechapeake Energy in advanced talks to buy Chief Oil Gas: sources

A view of a well site that sits atop the natural gas-rich Marcellus shale formation in Western Pennsylvania outside Union City, Pennsylvania, U.S. October 23, 2020. REUTERS Shannon Stapleton File Photo

Jan 19, Reuters -- Chesapeake Energy Corp. CHK.O is in advanced talks to acquire privately owned natural gas producer Chief Oil Gas for $2.4 billion, including debt, people familiar with the matter said on Wednesday.

A deal for Chief Oil Gas, founded and controlled by Texan 'wildcatter' Trevor Rees-Jones, is expected to be announced as soon as this week, according to sources. In wildcat drilling, exploration wells are dug in areas that are not known to be natural resource fields.

The acquisition by Chesapeake, a U.S. shale gas and oil producer that only emerged from bankruptcy last year, underscored the recovery of parts of the energy industry as natural resource prices surge to multi-year highs.

The sources who spoke on condition of anonymity to discuss private information cautioned that negotiations could still fall apart at the last moment.

A spokesman for Oil Gas didn't want to say anything. Chesapeake didn't respond immediately to a request for comment.

In October, Chief Oil Gas was up for sale, due to the surge in energy prices that have boosted corporate valuations in the industry.

It would be the second acquisition that Chesapeake has made since February 2021 when it emerged from one of the largest oil and gas producer bankruptcies of recent years. In November, Chesapeake completed the purchase of Vine Energy for $615 million.

Since leaving Chapter 11 bankruptcy protection, Chesapeake has focused on natural gas production, a return to its roots as a company founded in 1989 by wildcatters Aubrey McClendon and Tom Ward.

The company is located in Marcellus shale in northeastern Pennsylvania and has around 600,000 net acres, producing more than 1 billion cubic feet per day bcf d of natural gas.

The sale of Chief Oil Gas would be the latest combination of U.S. natural gas producers in the last few months.

In July Alta Resources was sold to EQT Corp EQT.N for $2.9 billion and Southwestern Energy Co SWN.N acquired Indigo Natural Resources for $2.7 billion in September and GEP Haynesville for $1.85 billion in December.