Southwestern Energy adds gas derivatives to back $1.85B GEP acquisition

Shale gas producer Southwestern Energy Co. and GEP Haynesville LLC have implemented additional natural gas derivatives, which could help repay Southwestern Energy's planned borrowings intended for its pending acquisition of GEP.

Southwestern Energy said it expects the incremental hedge positions to be able to cover at least 80% of the expected 2022 to 2024 production from the acquired properties, according to a Nov. 29 news release.

"With these incremental and acquisition-specific hedge positions executed at favorable prices, we have locked in sufficient cash flow to repay acquisition debt in a timely manner, which aligns with our stated goal to reduce our total debt to a target range of $3.0 billion to $3.5 billion," Southwestern Energy President and CEO William Way said.

Southwestern Energy's pending acquisition of GEP, worth roughly $1.85 billion, would create the largest producer in the Haynesville region. The deal would raise the combined company's production to approximately 4.7 Bcfe/d pro forma and its expected year-end 2021 total proved reserves to roughly 20.9 Tcfe.

Southwestern Energy's GEP deal follows its August 2020 acquisition of Appalachian Basin producer Montage Resources Corp. and its June acquisition of Haynesville producer Indigo Natural Resources LLC.