Natgas producer Chesapeake explores buying Southwestern Energy -sources
Oct 17 (Reuters) - U.S. natural gas producer Chesapeake Energy Corp (CHK.O) has approached Southwestern Energy (SWN.N), a peer valued by the stock market at $12 billion including debt, about a potential acquisition, people familiar with the matter said.
Were the two companies to combine, they would overtake EQT Corp (EQT.N) as the largest natural gas-focused exploration and production company in the U.S. by market value, at a time when shale companies are seeking scale and efficiencies.
Southwestern's shares rose 8% to $7.38 in Tuesday afternoon trading in New York on the news, hitting their highest level in almost a year. Chesapeake's shares rose 1.5% to $90.33.
Chesapeake's talks with Southwestern are preliminary, with no certainty the two sides will reach a deal, the sources said. Chesapeake could explore other potential acquisitions, and may end up pursuing a different target, the sources added.
The sources asked not to be identified because the matter is confidential. Chesapeake and Southwestern did not immediately respond to a request for comment.
An acquisition of Southwestern would be transformative for Chesapeake, which has been snapping up small rivals in the last two years. The two companies are neighbors; most of Southwestern's production is in Appalachia's shale formations and the Haynesville basin in Louisiana, where Chesapeake also operates.
The deal would also be a reversal of sorts. Southwestern acquired some of its acreage in West Virginia and Pennsylvania from Chesapeake for $5.4 billion in 2014.
In 2021, Chesapeake emerged from a bankruptcy which epitomized the boom and bust of debt-laden exploration and production companies that expanded aggressively in the shale patch. Since then, Chesapeake has been shedding oil-producing assets to focus on its competence in natural gas. It has a market value including debt of about $13 billion.
U.S. natural gas prices have been sluggish in recent months, as oversupply and warmer weather erode producers' profitability. Some analysts expect prices to go up in the next few months, as a pick-up in U.S. natural gas exports creates more domestic scarcity.
Dealmaking in the energy-producing sector has been heating up as companies race to secure the most lucrative acreage. Exxon Mobil Corp (XOM.N) last week agreed to acquire Pioneer Natural Resources (PXD.N) for $60 billion in stock, placing a big bet on the Permian basin, the biggest U.S. oilfield.
Germany caves in to French demands over EU electricity market reform
Berlin has lifted its objections to French subsidies for nuclear power
Germany has given leeway for France to use state subsidies to fund its nuclear power plants, unblocking a long-stalled reform of the EU electricity market in the face of vast state aid regimes in China and the US.
The agreement reached on Tuesday among energy ministers in Luxembourg will mean that France could use government support to finance its largely state-owned nuclear plants, which generate about 70 per cent of its electricity.
Such a move had been heavily contested by Germany, Austria and Luxembourg, which have been historically opposed to nuclear power but also feared that allowing Paris to subsidise its nuclear plants would provide French industry with structurally lower energy prices, giving it a competitive advantage.
As part of the new EU rules for the bloc’s electricity market, France will be allowed to use funding structures known as contracts for difference. These set a minimum price guarantee for power providers, as well as a ceiling above which the state can recover any revenue.
Paris, however, did not obtain a further concession, for the EU to allow revenues from those schemes applied to existing power plants to be refunded to industrial consumers. The Tuesday agreement also gives greater power to the European Commission to assess state aid benefits.
Agnès Pannier-Runacher, the French energy minister, said that the agreement was “a compromise which sets out a balance” that “allows member states to have room for manoeuvre and take action on the basis of their own energy mix”.
German vice-chancellor Robert Habeck said that the reform would give “access for consumers and industry to low electricity prices across Europe”.
EU ministers have been negotiating for months over reforms to the bloc’s electricity market that are intended to provide better investment signals to renewable power developers and secure electricity supply to prevent any spikes in prices.
The proposed overhaul was prompted by the bloc weaning itself off Russian gas after Moscow’s full-scale invasion of Ukraine and after last year’s record-high energy prices across the EU. Investors and policymakers have said that it is crucial to lower prices to keep European industry globally competitive.
Several ministers on Tuesday framed the reform as crucial to the bloc’s response to vast state subsidies for clean power available in the US and China.
“We are in a global competition for our energy intensive industries,” said Claude Turmes, Luxembourg’s energy minister.
One senior EU official involved in the talks said that finding an agreement between member states was “like walking a tightrope”.
The agreement will become law following negotiations with the European parliament, which are due to start on Thursday. It also includes allowances for countries that rely on coal power, such as Poland, which will be able to subsidise those plants until 2028 despite the bloc’s efforts to reduce its greenhouse gas emissions.
Bram Claeys, senior adviser at the Regulatory Assistance Project, an energy NGO, said that the “prolonged discussions” of member states had already been detrimental to new investments in clean energy projects.
“That is a big problem, because those investments can’t stall, but instead need to urgently speed up to tackle the root causes of the energy crisis and the impact that had on the European people and businesses,” he said.
News Corp break-up would unlock $7bn in value, says activist Starboard
Hedge fund wants Murdoch media group to spin off its online property listings business
Starboard Value has built a stake in News Corp and is pushing for billionaire owner Rupert Murdoch to break up the company, as legacy media groups face mounting pressure from shareholders to improve performance.
The activist hedge fund run by Jeff Smith announced the position at a conference on Tuesday, arguing that News Corp’s stock market valuation “does not make sense” and calling for a spin-off of its online property listings division.
“If News Corp separates the digital real estate assets through a tax-free spin[off] . . . shareholders will see significant appreciation in the company’s share price,” Smith said. Starboard estimates that a spin-off of the real estate business would unlock more than $7bn in value for News Corp shareholders.
News Corp shares are up 20 per cent this year, outperforming the broader US market and giving the group a valuation of $12.6bn. Its shares have climbed 5 per cent since Friday when Reuters reported that Starboard was taking on the Murdochs. The hedge fund has not disclosed the size of its stake in News Corp.
Investors have long complained that News Corp is worth less on the stock market than the sum of its parts — which include newspapers on three continents, financial information group Dow Jones, book publisher HarperCollins and a majority stake in the Australian property listings group REA.
Murdoch and his family trust controls about 40 per cent of the voting shares in News Corp, a source of concern for some shareholders who complain of a “Murdoch discount” that keeps the valuation of companies controlled by the billionaire depressed compared with media peers. Starboard on Tuesday pointed to the valuation of the New York Times, which trades at a higher multiple to earnings than Dow Jones, owner of the Wall Street Journal.
Murdoch, 92, last month stepped down from his role as co-chair of News Corp, relinquishing power to his son Lachlan.
Starboard’s incursion comes after the Murdochs in 2021 tried to combine News Corp with Fox, a deal that would have reunited the two halves of their media empire.
But after a pushback from independent shareholders, the Murdochs in January called off the proposed merger. Rupert and Lachlan Murdoch said the combination was “not optimal” for shareholders, a recognition of the reservations of big investors who feared the merger would fail to realise the full value of the assets.
The following month, News Corp revealed that a planned sale of one of its real estate assets — an opportunity for shareholders to unlock $3bn of this value — had fallen apart.
News Corp chief executive Robert Thomson has announced plans to cut staff by about 5 per cent this year because of macroeconomic challenges, such as inflation and rising interest rates, that have hit its businesses. For the year to June 30, News Corp’s revenue fell 5 per cent to $9.9bn. Net income for the year dropped to $187mn, a 75 per cent decline from the previous year.
Starboard is best known for pushing changes at software groups such as Salesforce and GoDaddy. Its new stake in the media conglomerate comes hot on the heels of a big success with a bet on Splunk, which last month announced a deal for it to be acquired by Cisco for $28bn.