US shale players Chesapeake Energy and Southwestern Energy have agreed to merge in an all-stock transaction valued at $7.4 billion to create a premier energy company focused on natural gas production.

Under the terms of the agreement, Southwestern shareholders will receive 0.0867 shares of Chesapeake common stock for each share they own in the company. The value was based on Chesapeake’s closing stock price of $6.69 on 10 January.

At this exchange ratio, the combined company would have an enterprise value of about $24 billion, with Chesapeake shareholders owning approximately 60% and Southwestern the remaining 40%.

Chesapeake said the combined company, which will assume a new name at closing of the transaction, will be uniquely positioned to deliver affordable, lower carbon energy to meet growing domestic and international demand.

“This powerful combination redefines the natural gas producer, forming the first US-based independent that can truly compete on an international scale,” said Chesapeake chief executive Nick Dell’Osso.

The transaction combines acreage in the Appalachia and Haynesville shale plays, giving the new company a net production of around 7.9 billion cubic feet per day of gas.

The companies have also identified overhead synergies of $400 million through improved capital efficiencies and operating margins.

Following the merger, Dell’Osso will serve as chief executive and the board of directors will increase to 11 members, initially comprising seven representatives from Chesapeake and four from Southwestern.

The deal has been approved by the boards of both companies and the transaction is expected to close in the second quarter of 2024.