Southwestern Energy (SWN) agreed to buy privately held natural gas company Indigo Natural Resources for about $2.7 billion.
Shares of Southwestern Energy, located in Spring, Texas, were off slightly to $5.72 on Wednesday.
Southwestern said in a statement that the $2.7 billion will be comprised of $400 million in cash, about $1.6 billion in Southwestern common stock and $700 million of assumed 5.375% senior notes due 2029.
Indigo is one of the largest private U.S. natural gas producers, with core dry gas assets across the stacked pay Haynesville and Bossier zones in northern Louisiana, Southwestern said.
The acquisition was unanimously approved by both companies' boards and is expected to close early in the fourth quarter subject to regulatory approvals, customary closing conditions and the approval by Southwestern Energy's shareholders.
Southwestern said the acquisition expands 2022 estimated margins by 12% due to low-cost access to premium markets in the growing Gulf Coast liquefied natural gas corridor.
The company said it expects to synergies of about $20 million in general and administration reductions and expects further operational and financial cost savings.
"The value of this high-quality inventory is further enhanced by our diverse transportation portfolio providing access to premium markets in the Gulf Coast and within Appalachia," said Bill Way, Southwestern Energy president and CEO, said in a statement.
Piper Sandler analyst Kashy Harrison, who has a neutral rating on the stock with a $4 price target, said he suspects "the deal was driven by SWN’s desire to extend inventory running room, gain improved proximity to premium markets in the gulf coast, and accelerate the deleveraging process," according to Bloomberg.