Southwestern Energy to acquire Indigo Natural Resources in $2.7B deal

Southwestern Energy to acquire Indigo Natural Resources in $2.7B deal

SPRING, Texas--(BUSINESS WIRE)--Southwestern Energy Company (NYSE: SWN) (the “Company” or “Southwestern”) today announced that it has entered into a definitive merger agreement with Haynesville producer Indigo Natural Resources, LLC (“Indigo”) under which it will acquire Indigo for approximately $2.7 billion. The transaction is expected to close early in the fourth quarter of 2021, subject to customary closing conditions. Transaction highlights include:

  • Increases projected cumulative free cash flow to approximately $1.2 billion from 2021 to 2023;
  • Improves estimated 2022 free cash flow per share ~30% and cash flow per debt adjusted share ~15%;
  • Accelerates expected delivery of sustainable leverage ratio below 2.0x in 2021 and progressing to 1.7x in 2022;
  • Expands 2022 estimated margins by 12% resulting from low cost access to premium markets in the growing Gulf Coast LNG corridor;
  • Complements existing portfolio, increases high-return dry gas inventory with over 1,000 locations added; and
  • Leverages operational expertise of integrating and developing operated, large-scale natural gas assets; increases net production to over 4 Bcfe per day, consisting of approximately 85% natural gas.

“Today we are proud to announce another accretive transaction that will benefit the Company’s shareholders for years to come. This acquisition enhances Southwestern’s position as a leading natural gas producer and aligns with our disciplined strategy to generate free cash flow, enhance our balance sheet, optimize performance and build scale. Indigo has done a terrific job building its business, and its balance sheet strength, low cost structure and high-quality acreage position in the core of the Haynesville play accelerates the delivery of our strategic goals,” said Bill Way, Southwestern Energy President and Chief Executive Officer.

Way continued, “Our footprint now extends across the two premier natural gas basins in the country and includes top-tier dry gas and liquids rich inventory. The value of this high-quality inventory is further enhanced by our diverse transportation portfolio providing access to premium markets in the Gulf Coast and within Appalachia. Southwestern Energy’s unique combination of a strong balance sheet, high-quality assets and resilient vertically integrated business is positioned to deliver long-term value creation.”

Indigo is one of the largest private US natural gas producers, with core dry gas assets across the stacked pay Haynesville and Bossier zones in northern Louisiana. Its high-margin assets are located in close proximity to the growing demand in the Gulf Coast LNG corridor. Indigo currently produces 1.0 Bcf per day net and expects to produce approximately 1.1 Bcf per day net upon closing. As of March 31, 2021, and adjusted for the recent sale of its non-core Cotton Valley assets, Indigo had $631 million of net debt and a leverage ratio of 1.1 times.


Southwestern Energy expects to invest at maintenance capital levels again in 2022, with activity across all of its operating areas. On the acquired acreage, the Company expects to run a 4 rig program in 2022, placing 30 to 40 wells to sales. With a maintenance capital program, the Company projects 14 years of economic inventory at current strip prices across its assets in Appalachia and Haynesville.

Preliminary 2022 estimates for certain key metrics of the newly combined enterprise are shown below. Estimates are based on $2.75 NYMEX and $58 WTI.

Preliminary 2022 Estimates




SWN + Indigo



(Decrease) (1)








EBITDA (non-GAAP) ($ in billions)







Net cash flow (non-GAAP) ($ in billions)







Capital investment ($ in billions)







Free cash flow (non-GAAP) ($ in billions)







Net debt to EBITDA (non-GAAP)







E&P margin ($ per Mcfe) (2)







Net Production (Bcfe/day)








Change represents SWN+Indigo as compared to SWN.


E&P Margin defined as weighted average realized price less lease operating expenses, general and administrative expenses and taxes other than income.

Synergies are expected to be approximately $20 million in G&A reductions with further operational and financial cost savings anticipated. There are opportunities for additional value creation by leveraging the Company’s core competencies for large scale, operated natural gas development, including its vertically integrated business, reservoir and base decline optimization, and use of innovation and data analytics. The Company’s increased scale provides the opportunity for credit upgrades and cost of capital reductions, which would deliver additional accretion to financial performance.

Transaction and Timing

The total consideration of $2.7 billion will be comprised of $400 million in cash, approximately $1.6 billion in SWN common stock and $700 million of assumed 5.375% senior notes due 2029.

The stock consideration consists of approximately 339 million shares of Southwestern Energy common stock, calculated utilizing the 30-day volume-weighted average price as of May 28, 2021, of $4.72. No Indigo shareholder will receive more than 10% of Southwestern Energy’s pro forma outstanding shares in connection with this transaction.

The transaction was unanimously approved by each of Southwestern Energy’s and Indigo’s board of directors. The transaction is expected to close early in the fourth quarter of 2021, subject to regulatory approvals, customary closing conditions and the approval by Southwestern Energy’s shareholders.


Goldman Sachs & Co. LLC served as the exclusive financial advisor to Southwestern and Skadden, Arps, Slate, Meagher & Flom LLP serve as legal advisor. Credit Suisse Securities (USA) LLC served as the exclusive financial advisor to Indigo and Kirkland & Ellis LLP served as legal advisor.

Conference Call

Southwestern Energy will host a conference call today, June 2, 2021, at 10:00 a.m. Central to discuss this transaction. To participate, dial US toll-free 877-883-0383, or international 412-902-6506 and enter access code 0998867. A live webcast will also be available at

About Southwestern Energy

Southwestern Energy Company is an independent energy company engaged in natural gas, natural gas liquids and oil exploitation, development, production and marketing.

About Indigo Natural Resource

Indigo Natural Resources LLC is one of the largest natural gas producers in the Haynesville Shale and the third largest private natural gas producer in the U.S. Indigo is an experienced operator, focused in northern Louisiana with direct access to Gulf Coast markets and associated industrial and LNG demand growth. Indigo is headquartered in Houston, Texas. For more information, please visit the Company’s website at

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Why here? Isn't all of their current operations in PA, OH and WV?

I think it is because SWN is natural gas focused.  In a list of major operators by ratio of natural gas to oil back in the day, SWN was at the bottom of the list, 96+% natural gas, while most of the other companies were chasing liquids and trying, as Chesapeake did, to get more oil in their production mix.  Now natural gas is back in vogue and the Haynesville Basin has the best economics.  Better than the Marcellus and Utica basins.  We should expect that the Martin family will go off to count their money and that most of the Indigo field employees will simply move up the road to SWN's office in the Woodlands.  I don't expect much will change except the name on the well applications and the royalty checks.

I'm glad l own un-drilled HA acreage. This upside NG trend is seriously eye-catching. So many pieces of the puzzle are aligning. It's been many years since hub pricing has popped so aggressively in May/June on high trading volume. Looks like the deep-pocket speculators are jumping onboard. Of course, the frenzy may be short-lived and it may not actually be a new golden age for NG, but it sure sort of feels that way in this moment in time.


I think it's a good move on SWN's part, at this time.  I feel that the gas focused portion of the industry is moving in the right direction finally.  If they want to have a long term future, it will require a new business model and serious efforts to "green" their operations.  It can be done but much time has been wasted and the foot dragging needs to end.

Southwestern and Indigo Combining Appalachia, Haynesville Natural Gas Assets in ‘Perfect Recipe for Success’

 By Carolyn Davis  June 2, 2021

Southwestern Energy Co. is moving beyond the Appalachian Basin to expand its natural gas opportunities with a $2.7 billion takeover of Haynesville Shale pure-play Indigo Natural Resources LLC.

The Houston independent, a Lower 48 pioneer in unconventional drilling techniques, said the merger would boost production to 4 Bcfe/d, 85% weighted to natural gas. Indigo, which now produces 1 Bcf/d net, has core dry gas assets across the stacked Haynesville and Bossier zones in North Louisiana.

Combining the gassy leaseholds in Appalachia and the Haynesville is a “perfect recipe for success,” Southwestern CEO Bill Way said during a conference call with investors.

“We know the Appalachian Basin,” he said. “We know Haynesville…quite well…We know quality, we know strategic benefits. We understand the importance of discipline…”

Southwestern was developing wells in the East Texas portion of the Haynesville at the start of the unconventional revolution in the mid-2000s until it began selling off the leasehold in 2010. Before it became an Appalachian pure-play, the independent was the leading Fayetteville Shale producer.

With Indigo, Southwestern’s footprint would extend “across the two premier natural gas basins in the country,” with dry gas and a liquids-rich inventory, Way said. “The value of this high quality inventory is further enhanced by our diverse transportation portfolio providing access to premium markets in the Gulf Coast and within Appalachia.”

Taking over Indigo is a “very logical move for us,” he told investors. Appalachia and the Haynesville are the “two leading natural gas basins in the United States. As we looked at different opportunities, those were our two primary focus areas…” 

Southwestern in November added to its Appalachian cupboard with the takeover of Montage Resources Corp. During 1Q2021, the company produced 269 Bcfe, 79% weighted to natural gas, and up from 201 Bcfe in the year-ago period.

Gulf Coast LNG Access

Indigo would give Southwestern prime Gulf Coast access to liquefied natural gas (LNG) export markets and the burgeoning industrial complex. Indigo, with 149,000 net acres in the Haynesville-Bossier formations, has around 1,000 drilling locations. Southwestern has an estimated 5,000 locations in Appalachia. At a planned place, there are about 14 years of maintenance inventory, according to Southwestern.

As important, Southwestern expects its margins in 2022 to climb by 12%, resulting from gaining access to the Gulf Coast LNG and petrochemical corridor. Cumulative free cash flow is projected to increase to $1.2 billion in 2023 from 2021. 

Indigo most recently reported production of 0.9 Bcf/d net following a sale of its Cotton Valley assets. Diversified Energy Co. plc in May paid $115 million net for a package of the northwestern Louisiana assets from subsidiary Indigo Minerals LLC. Indigo’s capital budget this year is set at $500-525 million, with up to 44 wells scheduled to be turned to sales. 

Once Indigo is integrated, Southwestern expects to run four rigs in Louisiana in 2022, with up to 40 wells turned to sales. Synergies are expected to reduce general/administrative expenses by $20 million.

The transaction, set for completion by year’s end, has been unanimously approved by each board. To complete the transaction, Southwestern agreed to pay Indigo $400 million cash and trade $1.6 billion in common stock, or an estimated 339 million shares. It also is assuming $700 million of 5.375% senior notes due in 2029. No Indigo shareholder is to receive more than 10% of Southwestern’s pro forma outstanding shares in connection with the transaction.

Like the Cabot Oil & Gas Corp.-Cimarex Energy Co. transaction announced in late May, Southwestern and Indigo “have no acreage overlap and little to offer in the way of operations” and synergies, according to Raymond James & Associates Inc. “However, the natural gas production profile remains for Southwestern, and the deal brings modest cash flow accretion…”

Most notably, said analysts, free cash flow is forecast to nearly double in 2022, up 96% to $470 million, based on $2.75/Mcf New York Mercantile Exchange gas prices and $58/bbl West Texas Intermediate oil.

BMO Capital Markets analyst Phillip Jungwirth said Southwestern “was an expected consolidator, so the deal isn’t a surprise,” and it worked in the Haynesville previously. Indigo has public debt, Jungwirth noted, “so investors are familiar with the company…” 

‘Extremely Active’ M&A Market

In an “extremely active” merger and acquisitions (M&A) market, “it seemed like only a matter of time before one of the large private Haynesville operators was rolled up in a multi-billion deal,” said Enverus senior M&A analyst Andrew Dittmar. 

The transaction, he said, tops that of Haynesville pure-play Comstock Resources Inc., which in 2019 took over privately-held Covey Park Energy LLC in a transaction that at the time created the largest player in North Louisiana/East Texas.

“The industry is overall bullish on the outlook for gas, and the Haynesville provides one of the two major sources of low-cost supply along with the Appalachian Basin,” Dittmar noted. “It also has the advantage of favorable geographic positioning near the Gulf Coast and its associated petrochemical and LNG export demand and strong infrastructure support.”

The “ease” to move gas to the Gulf Coast “is one advantage the Haynesville carries over Appalachia, where infrastructure is more constrained and building new pipelines has proven challenging,” Dittmar said. 

Enverus is estimating that Haynesville production would grow 25% by the end of 2022 to 14 Bcf/d.


this is Big News, and, from my reading, encouraging.  Don't know anything about Southwestern, but my very limited interactions with Indigo have been very good.

Those GHS members who were around at the time of the Lower Smackover - Brown Dense play researched and discussed the company regularly.  At the time SWN was the major player in the Fayetteville Shale play in AR and was in search of new oily reserves.  The Fayetteville Shale had poor economics and the company failed to prove up a large Brown Dense leasehold.  SWN abandoned the Brown Dense, sold their Fayetteville shale position and bought into the Marcellus Shale play.  I don't recall any posts regarding difficulty dealing with SWN, just a lot of disappointment that the Brown Dense never worked out.


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