E&P companies merge to form Coterra Energy

Coterra Logo

Cabot Oil & Gas, based in Houston, and Cimarex Energy, based in Denver, have completed their $17 billion merger. The combined company has been renamed Coterra Energy and has its head office in Houston.



The deal was originally announced back in May. Cimarex shareholders ended up with 50.5% of the combined stock. When the deal was announced, Wall Street wasn’t impressed as Cabot mainly operates in the Marcellus Basin (primarily gas) while Cimarex is mainly in the Permian Basin. They wanted Cimarex to merge with another Permian Basin operator. The deal with Cabot limited the scope for synergies.

Natural gas prices have almost doubled since the deal was announced, so the deal looks better from Cimarex’s perspective now.

In terms of the new management, Cabot CEO Dan Dinges becomes Executive Chairman, Cimarex CEO Thomas Jorden becomes the CEO, while Cabot CFO Scott Schroeder is appointed CFO.

Severance

Cimarex CFO Mark Burford is not an Executive officer of the combined group. I am not sure if he has left the company, as there is no official confirmation of that from the company. If he has, he will be entitled to a cash severance of $2.2 million (2x average annual compensation for the past two years, plus a pro-rata bonus for 2021). Even if he has not been terminated, his equity will vest, worth $9.7 million.

Mr. Dingles will be Executive Chairman until no later than December 2022. When he steps down, he will receive a $10 million severance payment.

Background to the merger

Cabot started looking at the possibility of combining with another E&P company in late 2019. At one point, in mid-2020 Cabot was looking at a three-party business combination. That deal fell through because one of the parties demanded a premium. Around the same time, Cimarex started preliminary discussions with other Permian Basin parties about potential mergers.

In the last few months of 2020, a representative of Tudor Pickering Holt had several separate conversations with Mr. Jorden and Mr. Schroeder. In January 2021, the representative suggested that two companies had enough common ground to start direct conversations.

The combined company had $1 billion of proforma revenues for the first quarter. its debt is 0.7 times EBITDAX (earnings before interest, tax, depreciation, amortization and exploration expenses).

SEC filing – Coterra Energy

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