Chesapeake Energy Corporation Consolidates Haynesville With At- Market Acquisition Of Vine Energy Inc.

OKLAHOMA CITY, Aug. 11, 2021 /PRNewswire/ -- Chesapeake Energy Corporation (NASDAQ:CHK) ("Chesapeake") and Vine Energy Inc. (NYSE:VEI) ("Vine") today announced that they have entered into a definitive agreement pursuant to which Chesapeake will acquire Vine, an energy company focused on the development of natural gas properties in the over-pressured stacked Haynesville and Mid-Bossier shale plays in Northwest Louisiana. The acquisition is a zero premium transaction valued at approximately $2.2 billion, based on a 30-day average exchange ratio as of Tuesday's close, equating to $15.00 per share.

Transaction highlights include: 

  • Vine shareholders will receive fixed consideration of 0.2486 shares of Chesapeake common stock plus $1.20 cash per share of Vine common stock, for total consideration of $15.00 per share, comprising of 92% stock and 8% cash
  • Increases Chesapeake's cumulative five-year free cash flow(1) outlook by approximately $1.5 billion, or 68% of the transaction value, to approximately $6.0 billion, or 66% of pro forma enterprise value
  • Immediately accretive to operating cash flow per share, free cash flow(1) per share, free cash flow yield(1), and GHG emissions profile
  • 2022 pro forma net debt-to-EBITDAX(1) ratio of 0.6x, preserves Chesapeake's balance sheet strength
  • Approximately $50 million in average annual savings expected from operating and capital synergies
  • Expected to increase base dividend by 27% to $1.75 per share post close reflecting cash flow accretion of transaction, subject to Board approval
  • Vine position consolidates Haynesville/Bossier adding approximately 370 premium 50% rate of return drilling locations at $2.50 NYMEX gas price
  • Lowers Chesapeake's pro forma total gathering, processing and transportation (GP&T) expense by approximately 15% and diversifies the company's midstream partnerships

(1)  Non-GAAP financial measures defined below.

Mike Wichterich, Chesapeake's Board Chairman and Interim Chief Executive Officer, commented, "This transaction strengthens Chesapeake's competitive position, meaningfully increasing our free cash flow outlook and deepening our inventory of premium gas locations, while preserving the strength of our balance sheet. By consolidating the Haynesville, Chesapeake has the scale and operating expertise to quickly become the dominant supplier of responsibly sourced gas to premium markets in the Gulf Coast and abroad."

Eric Marsh, Vine's Chairman, President, and Chief Executive Officer said, "We firmly believe that the quality of our assets, combined with the scale, depth and diversity of Chesapeake's portfolio, and our shared unwavering commitment to ESG excellence, provides significant opportunity to accelerate the return of capital to our combined shareholders."

David Foley, Global Head of Blackstone Energy Partners added, "We believe in the benefits of consolidation. Blackstone looks forward to being a Chesapeake shareholder and participating fully in the significant value creation potential that will be unlocked by the combined company."

Transaction Details

Under the terms of the merger agreement, which was unanimously approved by the Board of Directors of each company, Vine shareholders will receive a fixed exchange ratio of 0.2486 Chesapeake shares of common stock and $1.20 of cash for each share of Vine common stock owned. Upon closing, Chesapeake shareholders will own approximately 86% and Vine shareholders will own approximately 14% of the fully diluted shares of the combined company.

The transaction, which is subject to customary closing conditions, including certain regulatory approvals, and the approval of Vine shareholders, is expected to close in the fourth quarter of 2021. Funds managed by The Blackstone Group Inc. own approximately 70% of outstanding shares of Vine common stock and have entered into a support agreement to vote in favor of the transaction.

Preliminary 2022 Pro Forma Outlook

Pending the successful closing of the transaction in the fourth quarter of 2021, Chesapeake's preliminary plan is to operate 10 to 12 rigs in 2022, with 8 to 9 rigs focused on its gas portfolio and 2 to 3 rigs concentrating on its oil assets. The company will maintain its commitment to a disciplined capital reinvestment strategy, anticipating a 2022 reinvestment rate of 50 – 60%. At NYMEX strip pricing as of July 30, 2021, this preliminary capital program is anticipated to generate between $2.55 billion to $2.75 billion in total adjusted EBITDAX. Chesapeake also anticipates this preliminary capital program will result in its average annual 2022 oil production remaining flat from 2021 fourth quarter average levels. 

Updated 2021E – Preliminary 2022E Outlook (2)

2021E CHK

2021E CHK

2022E CHK

2022E CHK
Pro Forma

Oil Production (mmbbl)

23.0 – 25.0

23.5 – 25.5

20 – 22

20 – 22

Gas Production (bcf)

715 – 735

725 – 745

750 – 775

1,095 – 1,125

Total Production (mboe/d)

410 – 420

415 – 435

415 – 435

575 – 595

LOE per boe

$1.85 – $2.15

$1.85 – $2.15

$1.85 – $2.15

$1.65 – $1.95

GP&T per boe

$4.90 – $5.40

$4.90 – $5.40

$4.70 – $5.20

$3.90 – $4.40

G&A per boe

$0.85 – $1.15

$0.75 – $0.95

$0.75 – $0.95

$0.55 – $0.75

Adjusted EBITDAX(3) ($B)

$1.55 – $1.65

$1.8 – $1.9

$1.85 – $2.05

$2.55 – $2.75

Total Capex ($mm)

$670 – $740

$670 – $740

$900 – $1,200

$1,300 – $1,600

Reinvestment Rate





Enterprise Value ($B)



Net Debt(3) ($B) (6/30/21)



Fully Diluted Shares (mm)




2022 Projected Multiples (2)

2022E CHK

2022E CHK
Pro Forma

Operating Cash Flow per Share



FCF(3) / Fully Diluted Share



FCF Yield(3)



Net Debt / EBITDAX(3)




(2)  Based on 7/30/21 strip prices and 8/06/21 CHK stock price.

(3)  Non-GAAP financial measures defined below.

Increasing Base Dividend and Establishing Variable Return Program

Following completion of the transaction, Chesapeake expects to raise its base dividend by 27% to $1.75 per share as a result of the significant increase in free cash flow which reaches approximately $6 billion over the next five years. Additionally, Chesapeake announced the establishment of a variable return program to deliver 50% of the previous quarter's free cash flow to investors in cash, payable the following quarter, and beginning with results from the 2021 fourth quarter.

Conference Call Information

Chesapeake will conduct a conference call to discuss the transaction on Wednesday, August 11, 2021 at 9:00 am EDT. The telephone number to access the conference call is 888-317-6003 or 412-317-6061 for international callers. The passcode for the call is 2789084.

About the Companies

Headquartered in Oklahoma City, Chesapeake Energy Corporation's (NASDAQ: CHK) operations are focused on discovering and responsibly developing its large and geographically diverse resource base of unconventional oil and natural gas assets onshore in the United States.

Vine Energy Inc., based in Plano, Texas, is an energy company focused on the development of natural gas properties in the stacked Haynesville and Mid-Bossier shale plays in the Haynesville Basin of Northwest Louisiana. The Company is listed on the New York Stock Exchange under the symbol "VEI".



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Ronny, HOW RIGHT YOU ARE! You have to watch your back with Ck. They try to do things that are not in the contract. It is frustrating dealing with the likes of such crooks. They bought our contract from another entity, so we had no choice, but we continue to watch them as they have switched to taking transportation costs out of our piddling checks and that is not in our contract. I was hoping somebody legit would buy them out! Doesn't look like that will happen.

Sam, did you have a clause in your lease that prohibited transportation charges?

SONRIS no longer lists any permitted, drilling or completed wells for Vine.  The wells listed for Vine on the Weekly Rig Report are now all Chesapeake operated wells.  The change of operator is complete.  Chesapeake now has six Haynesville directed LA rigs.


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