On Monday, Cabot Oil & Gas Corp., the Delaware incorporated natgas and oil explorer headquartered in Houston, Texas, alongside its rival Cimarex Energy Co. having had operations in Houston, New Mexico and Oklahoma, said that the companies had agreed to a merger deal which in effect would create an American oil and gas enterprise with an enterprise value of roughly $17 billion, becoming the latest in a string of consolidations in a beleaguered US hydrocarbon industry that underpinned smaller energy firms’ helplessness to grapple with a pandemic-led downturn in oil and natgas prices last year.
Following release of the merger deal, which many industry analysts had contemplated as a shocking move that bolted out of the blues given Cabot’s gas-rich Marcellus shale positions in the northeast part of the US alongside Cimarex’s oil-rich acres in West Texas and Permian basin, shares’ prices of Cimarex curbed as much as 7.2 per cent to $66.07 a share, while Cabot tumbled as much as 6.9 per cent to $16.59 per share.
Cabot, Cimarex agree on a $17 billion merger deal
Aside from that, under the financial terms of the merger deal, Cimarex shareholders would receive 4.0146 shares of Cabot for each Cimarex shares they were holding, while the deal would also proffer a 50.50 per cent ownership for Cimarex in the combined entity.
Nonetheless, at a market valuation of $7.4 billion according to Cimarex’s Friday’s closing price of $71.50 per share, the deal represents a less than 1 per cent premium. Meanwhile, referring to a sustainable return and dividend which the ‘surprise’ merger deal might have secured, Cabot Chief Executive Dan Dinges said following the announcement, “You can create a company with sustainable free cash flow, the returns that all shareholders want through dividends, and get to the point of having the scale that the generalists look for to make a long-term investment. ”