Both Chesapeake and Southwestern’s boards of directors have approved the merger. Credit: rafapress/Shutterstock.

US natural gas companies Chesapeake Energy and Southwestern Energy Company have announced an all-stock merger valued at $7.4bn.

Under the merger agreement, Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each Southwestern share they hold.

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As per the announcement, the resulting entity will have large-scale acreage in both Appalachia and Haynesville, creating a major  energy company with a strong natural gas portfolio.

The new company will have a production rate of approximately 7.9bcfe/d, with more than 5,000 gross locations and a 15-year inventory.

The combined company also plans to establish a significant global marketing and trading presence in Houston.

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Chesapeake president and CEO Nick Dell’Osso said: “This powerful combination redefines the natural gas producer, forming the first US-based independent that can truly compete on an international scale. The world is short energy and demand for our products is growing, both in the US and overseas.

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“We will be positioned to deliver more natural gas at a lower cost, accelerating America’s energy reach and fueling a more affordable, reliable and lower-carbon future.”

Southwestern president and CEO Bill Way said: “Together, Southwestern and Chesapeake can drive improved margins and returns from our highly complementary portfolios through enhanced scale, capital allocation flexibility, and access to premium markets to supply growing global natural gas demand.”

The merger has been approved by the boards of directors of Chesapeake and Southwestern.

It is expected to close in the second quarter of 2024, subject to shareholder and regulatory approvals.

The US oil gas sector is currently seeing a wave of consolidations aimed at gaining greater size and efficiency.

Last week, APA and Callon Petroleum agreed a $4.5bn merger.