The Strategist

US shale oil companies Cabot and Cimarex announce merger

05/25/2021 - 03:25

US energy companies Cabot Oil & Gas and Cimarex Energy, which specialise in shale oil and gas production, announced a merger.

It is a "merger of equals". Cimarex shareholders will receive four Cabot shares for each of their shares, so they will hold 50.5% of the combined company and Cabot shareholders will hold 49.5%. The market capitalisation of the combined company, based on the share price of Cabot and Cimarex on Friday, May 21, is about $14bn.

The combined company will operate under a new name, which has not yet been disclosed. Its CEO will be current Cimarex CEO Thomas Jorden, while Cabot CEO Dan Dinges will head the company's board of directors.

The past year has seen several major mergers in the US shale market. For example, ConocoPhillips bought oil shale company Concho for $9.7bn and Chevron bought another oil shale company Noble Energy for $13bn. The reason for last year's mergers was the industry crisis due to falling oil prices in a pandemic, but this year, with oil prices rising, mergers have continued. In April, for example, Pioneer Natural Resources and DoublePoint merged for $6.4bn.

The Cabot and Cimarex merger brings together different assets in different regions. Cimarex produces mainly oil in the southern states of Texas, Oklahoma and New Mexico. Cabot specialises in gas production in the north-eastern US. As Mr. Jorden pointed out, this diversification of assets should protect the company from price fluctuations in certain commodities.