A rumored merger between Utica Shale oil and gas drillers Gulfport Energy Corp. and privately held Ascent Resources would continue the roll-up of Appalachian shale gas producers and would be welcomed by the market, investment analysts said. The deal is said to be valued at about $8 billion.
"Our conversations with investors and industry contacts suggest an all-equity reverse merger near proved-developed-producing pricing would be well-received by the market, creating a larger-scale, lower-cost entity that would appeal to investors," Truist Securities Inc. oil and gas analyst Neal Dingmann told clients March 30. "We believe scale continues to become more important, especially in areas such as Appalachia."
The transaction would give Gulfport, which was fresh out of bankruptcy proceedings in 2021, more scale by combining its Ohio operations with neighbor Ascent, said Charles Johnston, senior high yield oil and gas analyst with credit research firm CreditSights. At the same time, it would allow Ascent to have publicly traded stock without an IPO, Johnston said.
The bulk of Gulfport's Utica operations are in the dry gas counties along the Ohio River on the eastern edge of the state, while Ascent's wells are focused on the "wetter" counties to the west where natural gas liquids and oil are mixed into the production stream.
Gulfport produces 1 Bcfe/d, 90% gas, with 77% of those volumes coming from the Utica, according to Matthew Keillor, an analyst with energy data and software company Enverus. Ascent produces nearly 2 Bcfe/d, 91% gas, all from the Utica.
Truist said Ascent, backed by private equity firm First Reserve Corp. and the Energy and Minerals Group's EMG Fund II Management LP, could reasonably offer $114 per share for Gulfport, a nearly 32% premium to Gulfport's trading value at March 29 market close.
Public companies have been snapping up privately held neighbors in Pennsylvania's larger Marcellus Shale over the past year.
Most recently, Chesapeake Energy Corp. announced a $2.6 billion deal in January to buy northeast Pennsylvania neighbor Chief Oil & Gas LLC. EQT Corp., the largest U.S. gas producer, bought out Alta Resources LLC, another Chesapeake neighbor in Lycoming County, for $2.9 billion in July 2021. Both deals brought immediate gains in production volumes and revenues.
Talks of a potential merger were first reported March 25 by Bloomberg. Gulfport had no comment March 30 on any deal. Ascent did not reply to requests for comment.
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