Economist Talks Potential Impact Of Chesapeake Energy Merger

A local economist said the merger of Chesapeake Energy and Southwestern Energy looks to be beneficial for both companies as well as Oklahoma City.

Russell Evans, partner and chief economist at Thorberg Collectorate, said the merger allows Chesapeake to expand its existing fields of production, which opens the door to cost-saving measures. It also benefits Southwestern Energy, based in Springs, Texas, because the company had been suffering from debt and was struggling to return dividends to shareholders, Evans said.

The merger, announced by Chesapeake on Thursday, is an all-stock transaction valued at $7.4 billion. While the boards of directors of both companies have approved the merger, it is still subject to approvals by shareholders and regulatory clearances. The goal is to close the transaction in the second quarter of this year, Chesapeake said in a news release. The company will then take on a new name, which has yet to be announced.

Chesapeake said the combined company will remain headquartered in Oklahoma City, although it was unclear how the company will utilize the campus currently occupied by Chesapeake, located off Northwestern Avenue.

Evans said the combined company staying in Oklahoma City is good for the area. "I think not put Oklahoma City on the map as an energy city but reinforce its reputation as an energy state and energy-headquartered city," said Evans.

Oklahoma City Mayor David Holt also said the merger sounded like good news when he first heard about it. "If it is good as it sounds, we’re very grateful and excited and good to see this legacy of Chesapeake continue on in a new form," Holt told News 9. "Obviously, this company has meant a lot to our city for the last 30 years in so many ways."

News 9 asked Evans if the merger could have an impact on prices for consumers. "I don't know that we'll have a big price impact. I think what the combined company will be able to do is really be able to participate in what is an emerging global market for natural gas," said Evans.

Although it's too early to tell for sure, Evans said people's electric bills may also be affected by the merger. "Natural gas is a very efficient fuel in terms of the generation of electricity," Evans explained. "And so you can probably draw a line between a major investment in natural gas production and what it may mean for that base load for electricity generation going forward."

As for the impact on jobs, Evans said it's also too soon to know.

"Because both companies are active in some of the same fields of production, there will be some cost-cutting measures. That may involve some headcount redundancies. We don't know at this point," said Evans. "But then at the same time, it opens up opportunities for the company to really participate in the market in new ways, which you would think would provide opportunities to add headcount."

Nick Dell'Osso, the president and CEO of Chesapeake who will continue those roles at the combined company, said the merger forms "the first U.S.-based independent that can truly compete on an international scale."

"We will be positioned to deliver more natural gas at a lower cost, accelerating America's energy reach and fueling a more affordable, reliable, and lower carbon future," said Nick Dell'Osso in a statement. "I look forward to leading the talented workforce of the combined organization to accelerate the long-term value opportunity for our shareholders, employees, and all stakeholders."

Related: Chesapeake Energy Corporation, Southwestern Energy To Merge; OKC To Be Headquarters