OKLAHOMA CITY and HOUSTON, Oct. 30,
2018 /PRNewswire/ -- Chesapeake Energy Corporation
(NYSE:CHK) and WildHorse Resource Development Corporation
(NYSE:WRD) today jointly announced that Chesapeake has entered into
a definitive agreement to acquire WildHorse, an oil and gas company
with operations in the Eagle Ford Shale and Austin Chalk formations in southeast
Texas, in a transaction valued at
approximately $3.977 billion, based
on yesterday's closing price, including the value of WildHorse's
net debt of $930 million as of
June 30, 2018. At the election of
each WildHorse common shareholder, the consideration will consist
of either 5.989 shares of Chesapeake common stock or a combination
of 5.336 shares of Chesapeake common stock and $3 in cash, in exchange for each share of
WildHorse common stock. The transaction was unanimously approved by
the Board of Directors of each company.
The acquisition of WildHorse expands Chesapeake's oil growth
platform and accelerates progress toward its strategic and
financial goals of enhancing margins, achieving sustainable free
cash flow generation, and reducing net debt to EBITDA
ratio.
Transaction highlights and pro forma performance projections
include:
- Materially Increases Oil Production/Enhances Oil Mix:
Projected to double adjusted oil production by 2020 from
stand-alone adjusted 2018 estimates, increasing to a projected
range of 125,000 to 130,000 barrels (bbls) of oil per day in 2019,
and 160,000 to 170,000 bbls of oil per day in 2020; Chesapeake's
2020 projected adjusted oil production mix is expected to increase
to approximately 30% of total production, compared to approximately
19% today;
- Significant EBITDA Margin Accretion: Increases projected
EBITDA per barrel of oil equivalent (boe) margin by approximately
35% in 2019 and by approximately 50% in 2020, based on current
strip prices;
- Transforms Portfolio with Expanded Oil Growth Platform:
Adds approximately 420,000 high margin net acres, approximately 80
to 85% of which is undeveloped, in the Eagle Ford Shale and
Austin Chalk formations with
strategic access to premium Gulf Coast markets; addition of the
WildHorse asset creates an expansive oil growth platform which
complements Chesapeake's existing high margin Eagle Ford and Powder
River Basin positions; moving forward, Chesapeake expects over 80%
of future drilling and completion activity will be directed toward
high-margin oil opportunities.
- Substantial Cost Savings: $200 to $280
million in projected average annual savings, totaling
$1 to $1.5
billion by 2023, due to operational and capital efficiencies
as a result of Chesapeake's significant expertise with
unconventional assets and technical and operational excellence;
incremental savings through elimination of redundant corporate
overhead, gathering, processing and transmission synergies and
improved capital markets execution due to improved credit
metrics;
- Accelerates Deleveraging: Transaction will accelerate
progress toward goal of 2.0x net debt to EBITDA ratio; improves
projected 2019 net debt to EBITDA ratio to approximately 3.6x and
projected 2020 net debt to EBITDA ratio to approximately 2.8x,
based on current strip prices.
Doug Lawler, Chesapeake's
President and Chief Executive Officer, stated, "This transaction
accelerates Chesapeake's strategic plan and expands the
value-creation opportunities for our shareholders by adding a
premier asset at an attractive valuation, significantly boosting
oil production, EBITDA margins and cash flow growth, while
improving our leverage metrics. The addition of WildHorse, together
with our substantial growth profile in the Powder River Basin,
advances our transformation into a highly competitive company with
a diverse portfolio of high-quality assets, a stronger balance
sheet and meaningful oil-growth potential."
Jay Graham, Chief Executive
Officer and Chairman of the Board of Directors of WildHorse
Resource Development said, "We are extremely proud of the company
we built and brought public less than two years ago. This
combination creates an impressive oil growth platform which
provides both immediate value and potential for significant
long-term upside to our shareholders. As a highly regarded
operator, Chesapeake brings the technical expertise and operational
efficiencies needed to maximize the value of this premier
asset."
Upon closing, Chesapeake shareholders will own approximately 55%
of the combined company, and WildHorse shareholders will own
approximately 45%, depending on the consideration elected. Prior to
closing, WildHorse will designate two individuals, presently
expected to be Jay Graham and
current WildHorse Director David
Hayes to be added to Chesapeake's Board of Directors. R.
Brad Martin and Doug Lawler will continue to serve as
Chesapeake's Chairman of the Board of Directors and President,
Chief Executive Officer and Director, respectively.
Investment funds managed by NGP Energy Capital Management, LLC,
collectively WildHorse's largest shareholder, have entered into a
voting and support agreement in support of the transaction. NGP's
Managing Partner, Tony Weber,
commented, "NGP has observed Chesapeake's significant
transformation over the last several years and believes it is a
compelling investment. We have the utmost confidence in the
leadership team's strategy and ability to deliver incremental,
meaningful value creation."
Chesapeake expects to finance the cash portion of the WildHorse
acquisition, which is expected to be between $275 million and approximately $400 million, through its revolving credit
facility. The transaction, which is subject to shareholder
approvals from both companies and customary closing conditions and
regulatory approvals, is expected to close in the first half of
2019.
Goldman Sachs & Co. LLC acted as financial advisor, and
Wachtell, Lipton, Rosen & Katz and
Baker Botts L.L.P. acted as legal counsel to Chesapeake.
Tudor, Pickering, Holt & Co., Morgan Stanley & Co. LLC and
Guggenheim Securities, LLC acted as financial advisors and Vinson
& Elkins LLP and Akin Gump Strauss Hauer & Feld LLP acted
as legal counsel to WildHorse and NGP, respectively.
Conference Call Information
Additional details about
the transaction and Chesapeake's strategy will be provided on a
teleconference call that has been scheduled for today, October 30, 2018 at 9:00
am EDT. The telephone number to access the conference call
is 877-871-3172 or 412-902-6603. The passcode for the call is
0118883. The conference call will be webcast and can be found at
www.chk.com in the "Investors" section of Chesapeake's
website.
Headquartered in Oklahoma
City, Chesapeake Energy Corporation's (NYSE: CHK) operations
are focused on discovering and developing its large and
geographically diverse resource base of unconventional oil and
natural gas assets onshore in the United
States.
WildHorse Resource Development Corporation is an
independent oil and natural gas company focused on the acquisition,
exploration, development and production of oil, natural gas and NGL
properties primarily in the Eagle Ford Shale and Austin Chalk in East
Texas.
Cautionary Statement Regarding Forward-Looking
Information
This communication may contain certain forward-looking
statements, including certain plans, expectations, goals,
projections, and statements about the benefits of the proposed
transaction, WildHorse's and Chesapeake's plans, objectives,
expectations and intentions, the expected timing of completion of
the transaction, and other statements that are not historical
facts. Such statements are subject to numerous assumptions, risks,
and uncertainties. Statements that do not describe historical or
current facts, including statements about beliefs and expectations,
are forward-looking statements. Forward-looking statements may be
identified by words such as expect, anticipate, believe, intend,
estimate, plan, target, goal, or similar expressions, or future or
conditional verbs such as will, may, might, should, would, could,
or similar variations. The forward-looking statements are intended
to be subject to the safe harbor provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934, and the Private Securities Litigation Reform Act of
1995.
While there is no assurance that any list of risks and
uncertainties or risk factors is complete, below are certain
factors which could cause actual results to differ materially from
those contained or implied in the forward-looking statements: the
possibility that the proposed transaction does not close when
expected or at all because required regulatory, shareholder or
other approvals are not received or other conditions to the closing
are not satisfied on a timely basis or at all; the risk that
regulatory approvals required for the proposed merger are not
obtained or are obtained subject to conditions that are not
anticipated; potential adverse reactions or changes to business or
employee relationships, including those resulting from the
announcement or completion of the transaction; uncertainties as to
the timing of the transaction; competitive responses to the
transaction; the possibility that the anticipated benefits of the
transaction are not realized when expected or at all, including as
a result of the impact of, or problems arising from, the
integration of the two companies; the possibility that the
transaction may be more expensive to complete than anticipated,
including as a result of unexpected factors or events; diversion of
management's attention from ongoing business operations and
opportunities; the ability of Chesapeake to complete the
acquisition and integration of WildHorse successfully; litigation
relating to the transaction; and other factors that may affect
future results of WildHorse and Chesapeake.
Additional factors that could cause results to differ materially
from those described above can be found in WildHorse's Annual
Report on Form 10-K for the year ended December 31, 2017 and in its subsequent Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2018 and June
30, 2018, each of which is on file with the SEC and
available in the "Investor Relations" section of WildHorse's
website, http://www.wildhorserd.com/, under the subsection "SEC
Filings" and in other documents WildHorse files with the SEC, and
in Chesapeake's Annual Report on Form 10-K for the year ended
December 31, 2017 and in its
subsequent Quarterly Reports on Form 10-Q for the quarters ended
March 31, 2018 and June 30, 2018, each of which is on file with the
SEC and available in the "Investors" section of Chesapeake's
website, https://www.chk.com/, under the heading "SEC Filings" and
in other documents Chesapeake files with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither WildHorse nor Chesapeake assumes any obligation to update
forward-looking statements to reflect circumstances or events that
occur after the date the forward-looking statements were made or to
reflect the occurrence of unanticipated events except as required
by federal securities laws. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
Important Additional Information
This communication relates to a proposed business combination
transaction (the "Transaction") between WildHorse Resource
Development Corporation ("WildHorse") and Chesapeake Energy
Corporation ("Chesapeake"). This communication is for informational
purposes only and does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, in any jurisdiction, pursuant to the
Transaction or otherwise, nor shall there be any sale, issuance,
exchange or transfer of the securities referred to in this document
in any jurisdiction in contravention of applicable law.
In connection with the Transaction, Chesapeake will file with
the SEC a registration statement on Form S-4 that will include a
joint proxy statement of Chesapeake and WildHorse and a prospectus
of Chesapeake, as well as other relevant documents concerning the
Transaction. The Transaction involving WildHorse and Chesapeake
will be submitted to WildHorse's stockholders and Chesapeake's
shareholders for their consideration. STOCKHOLDERS OF WILDHORSE AND
SHAREHOLDERS OF CHESAPEAKE ARE URGED TO READ THE REGISTRATION
STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
TRANSACTION WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT
DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION. Investors will be able to obtain a free copy of the
registration statement and the joint proxy statement/prospectus, as
well as other filings containing information about WildHorse and
Chesapeake, without charge, at the SEC's website
(http://www.sec.gov). Copies of the documents filed with the SEC
can also be obtained, without charge, by directing a request to
Investor Relations, WildHorse, P.O. Box 79588, Houston, Texas 77279, Tel. No. (713) 255-9327
or to Investor Relations, Chesapeake, 6100 North Western Avenue,
Oklahoma City, Oklahoma, 73118,
Tel. No. (405) 848-8000.
Participants in the Solicitation
WildHorse, Chesapeake and certain of their respective directors,
executive officers and employees may be deemed to be participants
in the solicitation of proxies in respect of the Transaction.
Information regarding WildHorse's directors and executive officers
is available in its definitive proxy statement, which was filed
with the SEC on April 2, 2018, and
certain of its Current Reports on Form 8-K. Information regarding
Chesapeake's directors and executive officers is available in its
definitive proxy statement, which was filed with the SEC on
April 6, 2018, and certain of its
Current Reports on Form 8-K. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise,
will be contained in the joint proxy statement/prospectus and other
relevant materials filed with the SEC. Free copies of this document
may be obtained as described in the preceding paragraph.
CHK INVESTOR
CONTACT:
Brad Sylvester,
CFA
405-935-8870
ir@chk.com
|
CHK MEDIA
CONTACT:
Gordon
Pennoyer
405-935-8878
media@chk.com
|
CHESAPEAKE ENERGY
CORPORATION
6100 North Western
Avenue
P.O. Box
18496
Oklahoma City, OK
73154
|
|
|
|
WRD INVESTOR
CONTACTS:
|
|
WILDHORSE RESOURCE
DEVELOPMENT
|
Pearce Hammond,
CFA
713-255-7094
|
Vedran Vuk
713-255-6962
|
9805 Katy Freeway,
Suite 400
Houston, TX
77024
|
phammond@wildhorserd.com
|
vvuk@wildhorserd.com
|
|
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SOURCE Chesapeake Energy Corp.