Oil & Gas Research
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Cost escalation driven by a spike in commodity prices in 2021

Southwestern Energy Co. has agreed to acquire Haynesville shale producer Indigo Natural Resources LLC for $2.7 billion. The deal adds to Southwestern Energy’s northeast and southwest Marcellus assets, increases highreturn dry gas inventory with 149,000 net acres and some 1,000 locations in the gassy Haynesville, increases net production to over 4 bcfed (about 85% natural gas), and expands 2022 estimated margins by 12% resulting from low cost access to premium markets in the growing Gulf Coast LNG corridor, the company said in a statement June 2. Indigo is one of the largest private US natural gas producers, with core dry gas assets across the stacked pay Haynesville and Bossier zones in northern Louisiana. Indigo currently produces 1.0 bcfd net and expects to produce 1.1 bcfd net upon closing. As of Mar. 31 and adjusted for the sale of its Cotton Valley assets, Indigo had $631 million of net debt and a leverage ratio of 1.1 times. Total consideration of $2.7 billion will be comprised of $400 million in cash, $1.6 billion in SWN common stock, and $700 million of assumed 5.375% senior notes due 2029. Southwestern expects to invest at maintenance capital levels again in 2022, with activity across all its operating areas. On the acquired acreage, the company expects to run a 4-rig program in 2022 to keep production roughly flat at 4.1 bcfd, placing 30-40 wells to sales. With a maintenance capital program, the company projects 14 years of economic inventory at current strip prices across its assets in Appalachia and Haynesville. Synergies are expected to be $20 million in G&A reductions with further operational and financial cost savings anticipated, the company said.

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