If successful, the deal would result in an entity worth nearly $17bn that would become a leading natural gas-focused exploration and production company in the US by market value.
As per the report, the merger could be finalised as early as this week, barring any breakdown in discussions.
The news follows an October report that Chesapeake was considering the acquisition of Southwestern.
Chesapeake and Southwestern, which share operational regions in Appalachia’s shale formations and the Haynesville basin in Louisiana, did not respond to Reuters’ requests for comment.
The merger discussion is set against a backdrop of sinking US natural gas prices, which saw their largest percentage drop since 2006 at the end of 2023.
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The decline was attributed to record production levels, substantial inventory and a milder winter season.
Chesapeake has been divesting its oil-producing assets to concentrate on natural gas, a strategy reinforced since its emergence from bankruptcy in 2021.
In a recent transaction, SilverBow Resources acquired Chesapeake’s assets in South Texas for $700m.
The deal, which was finalised last month after being agreed upon in August 2023, included Chesapeake’s 42,000 net acres and approximately 540 wells in the Eagle Ford basin’s condensate-rich areas, along with associated property, plants and equipment.
The merger talks between Chesapeake and Southwestern come at a time when the industry is witnessing a wave of consolidations aimed at achieving greater scale and efficiency.
In 2023, US energy majors ExxonMobil, Chevron and Occidental announced similar deals.