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Southwestern Splashes Cash On Louisiana Producer

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Texas-based Southwestern Energy Company is to acquire Haynesville producer Indigo Natural Resources for $2.7bn. 

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. Its high-margin assets are near the growing demand in the Gulf Coast LNG corridor. 

Bill Way, Southwestern Energy president and CEO, said: “Our footprint now extends across the two premier natural gas basins in the country and includes top-tier dry gas and liquids rich inventory. 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.”

Indigo currently produces 1.0 Bcf per day net and expects to produce approximately 1.1 Bcf per day net upon closing. As of March 31, 2021 and adjusted for the recent sale of its non-core Cotton Valley assets, Indigo had $631m of net debt and a leverage ratio of 1.1 times.

Southwestern Energy expects to invest at maintenance capital levels again in 2022, with activity across all its operating areas. On the acquired acreage, it expects to run a four-rig program in 2022, placing 30 to 40 wells to sales. With a maintenance capital program, Southwestern Energy projects 14 years of economic inventory at current strip prices across its assets in Appalachia and Haynesville.

The total consideration of $2.7bn will be comprised of $400m in cash, approximately $1.6bn in SWN common stock and $700m of assumed 5.375% senior notes due 2029.

The transaction is expected to close early in the fourth quarter of 2021, subject to customary closing conditions.

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