NEW YORK: Cabot Oil & Gas Corp and Cimarex Energy Co agreed a merger on Monday to form a US-wide oil and gas firm with an enterprise value of some $17 billion, a deal analysts termed surprising in a sector recently focused on “pure-play” models.
Cimarex shares tumbled 7.2% to $66.07, while Cabot’s stock fell 6.9% to $16.59.
The deal was a “surprise”, according to at least two analysts, as it brings together Cabot’s gas-rich Marcellus shale positions in the US northeast and Cimarex’s oil-heavy acres in West Texas.
US shale producers have in recent years tended to focus on a single geography to optimize cost savings and attract investors, though the pure-play model has not stopped money managers exiting amid poor returns versus other economic sectors and environmental concerns.
Under the deal terms, Cimarex shareholders will get 4.0146 shares of Cabot stock for each share held, and will own 50.50% of the combined company.
At an implied equity value of $7.4 billion, or $71.50 per Cimarex share, the deal reflects a less than 1% premium to the oil producer’s Friday close.
Keybank analysts expressed concern the deal turns Cimarex into a gas producer and takes away any benefits from rising oil prices. They also highlighted the meager premium.
Speaking to Reuters, Cabot Chief Executive Dan Dinges said the combined entity - to be named at a later date - could hold appeal for shareholders in a way neither company could individually.
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