Southwestern Energy to sell Fayetteville shale assets for $1.865bn

Southwestern Energy Company has signed an agreement to divest its Fayetteville shale exploration and production (E&P) and associated midstream gathering assets in Arkansas, US, to Flywheel Energy for $1.865bn.

The deal will also see Flywheel Energy assume $438m of future contractual liabilities after considering certain obligations retained by Southwestern Energy.

The assets being sold include around 915,000 net acres, 4,033 operated producing wells and 3.7Tcf of proved reserves.

Flywheel Energy will also acquire anticipated 2019 production of 225-230Bcf and related midstream gathering infrastructure and compression.

At closing, Southwestern Energy will transfer certain natural gas hedge positions to Flywheel Energy.

Southwestern Energy president and CEO Bill Way said: “The sale of Fayetteville represents a pivotal and deliberate step towards fulfilling our promise to reposition Southwestern Energy to capture greater returns from our higher margin Appalachia assets.

“We are pleased with the process, the outcome and the resulting valuation of this significant asset. This transaction is a significant milestone in advancing our strategic plan.

“Our shareholders will benefit from an optimised portfolio, stronger balance sheet, including improved financial flexibility and the return of capital to all shareholders through a share repurchase programme.”

The company will use a portion of proceeds to replace cash flow that would have been generated by the Fayetteville assets if they were not disposed of.

The proceeds will be reinvested into the company’s liquids-rich assets in West Virginia.

Subject to customary closing conditions, the transaction is expected to be completed in December this year and marks Southwestern Energy’s exit from Fayetteville.

Furthermore, it will allow Southwestern Energy to realise additional annualised interest and organisational cost reductions between $60m and $75m.

The firm has also launched a conditional tender offer for up to $900m of its senior notes, as well as a share repurchase programme of up to $200m.

Flywheel Energy is supported by Kayne Private Energy Income Funds and started its acquisition spree last year with certain interests in the Williston Basin for $285m.