U.S. shale drillers Cabot Oil & Gas Corp. and Cimarex Energy Co. said Monday that they plan to merge in an all-stock deal, combining companies that had a market capitalization of about $14 billion as of Friday.
The combination of Cimarex, an operator in Texas, Oklahoma and New Mexico primarily focused on oil, and Cabot, a natural-gas producer in the Northeastern U.S., brings together two firms operating in different regions and extracting different commodities.
It follows a string of tie-ups between American fracking companies as the energy industry emerges from the Covid-19 pandemic. Recent deals have mostly paired up rivals in the same or similar regions. Having a mix of assets in oil, gas and natural-gas liquids should protect the company against price swings in any single commodity, a particular benefit for shareholders that have sharpened their demands for better investment returns in recent years, said Thomas Jorden, chief executive officer of Cimarex.
“It’s a better way to ride through the cycles in our business,” Mr. Jorden said. “The demands of our sector, in terms of returning free cash flow to our owners, [tell us that] these swings in our cash flow are poison, and this is just a wonderful antidote to volatility.”
Recent U.S. shale deals have included the all-stock combination of Colorado’s Bonanza Creek Energy Inc. and Extraction Oil & Gas Inc. earlier this month, and Pioneer Natural Resources Co. ’s purchases in recent months of smaller rivals in the Permian Basin of West Texas and New Mexico.
