Independence Energy and Contango Oil and Gas have agreed to merge in all-stock transaction with an enterprise value of $5.7 billion.
Independence is an E&P business built and managed by KKR, a global investment firm. It consists of upstream oil and gas assets in North America, including those in the Permian, Eagle Ford, Rockies, Denver Julesburg and Barnett basins, as well as mineral and royalty interests and midstream infrastructure.
Contango operates in the Permian, Mid-Continent and Rockies areas. In October 2020, it moved its head office from Houston to Fort Worth, following its merger with Mid-Conn. Contango has made four acquisitions in the past 18 months and has a similar philosophy to KKR’s Energy Real assets team.
The Independence shareholders will own 76% of the combined business, Contango shareholders will own 24%. The combined business will be based in Houston with a new name.
The KKR Energy Real assets team will run the business, led by David Rockecharlie (CEO) and Brandi Kendall (CFO). They will remain employees of KKR. John Goff, the chairman of Contango, will be the chairman of the combined group.
The business is being positioned to be a leading consolidator in the US E&P sector and it will be KKR’s primary platform for pursuing upstream oil and gas opportunities. Unusually, the combined business, even as a public company, will be paying KKR a management fee of $53.3 million per annum plus 1.5% per annum of the net proceeds from all future issuances of equity securities.
The transaction is expected to close late in the 3rd quarter or early in the 4th quarter.