Independence Energy and Contango Oil & Gas Company have agreed to merge in an all-stock deal to create a new oil and gas company with $5.7bn enterprise value.
According to estimates, the combined company will have a daily production of 108,000-114,000 barrels of oil equivalent per day in 2022.
Subject to completion of the deal, shareholders of Independence will own approximately 76% stake in the new entity while Contango shareholders will hold the remaining 24% interest.
Independence Energy, which is managed by KKR’s energy real assets team, is a diversified upstream oil and gas business with a scaled portfolio of low-decline, producing assets.
Contango Oil & Gas has a portfolio of low-decline, producing assets, located mainly in the Mid-Continent, Rockies, and Permian areas.
David Rockecharlie, who is currently head of KKR energy real assets, will serve as the CEO of the combined company.
Contango Oil & Gas chairman John Goff said: “This is a very compelling merger for Contango shareholders providing substantial value accretion, significant scale and lower cost of capital. KKR’s desire to position the combined company to be their long-term primary platform to focus on continued consolidation in the industry is a testament to what the team has created at Contango.”
Contango Oil & Gas will continue to operate as a subsidiary of the combined company, which will have an equity market capitalisation of approximately $4.8bn.
The combined company will be based in Houston, US. It will operate under a new name and will be managed by KKR’s Energy Real Assets team.
Scheduled for completion during late Q3 2021 or early Q4 2021, the deal is subject to the approval of Contango Oil & Gas’ shareholders, as well as certain regulatory and customary closing conditions.