KKR's Independence, Contango to merge in $5.7 bln oil and gas deal (updated)

RedHawk Holdings

08/06/2021 11:07

(Adds comment from conf. call; updates share movement)
    By Arunima Kumar
    June 8 (Reuters) - KKR & Co's  KKR.N  Independence Energy
LLC and Contango Oil & Gas Co  MCF.A  will merge in an all-stock
deal to create a consolidation-focused oil and gas company with
an enterprise value of about $5.7 billion.
    Deal-making in the sector has been on the rise as a
vaccination-led recovery in demand has boosted oil and gas
prices after one of the worst energy downturns in history.
    The companies see "large and attractive" opportunities among
the large cap independent and small sub-scale public companies
as well as private companies that are seeking liquidity,
executives said in call with analysts on Tuesday.
    Contango's shares jumped 15% to $6.47, while KKR shares
traded flat in early trading.
    Both Independence, built and managed by private equity KKR's
Energy Real Assets team, and Contango have producing assets
across Rockies in Colarado, Permian in Texas and Mid-Continent
basins.
    Independence shareholders will own about 76% and Contango
investors will own the rest of the combined company after the
deal, which is expected to close in the third quarter or early
fourth quarter. 
    The new company is expected to produce 108,000 to 114,000
barrels of oil equivalent per day in 2022, with adjusted core
earnings between $750 million and $800 million.
    Based on Contango's closing price on Monday, the combined
company will have an initial equity market capitalization of
about $4.8 billion.
    The combined business will be managed by KKR's Energy Real
Assets team and David Rockecharlie, head of KKR Energy Real
Assets, will serve as the chief executive. 
    Contango's chairman and largest shareholder, John Goff, will
be the chairman of the combined company, which will be
headquartered in Houston.
     It expects to operate under a new name and a new ticker
symbol and plans to list on the New York Stock Exchange. 
    KKR will receive a special class of non-economic preferred
stock that provides it with the authority to appoint all board
members as well as some consent rights over actions such as debt
incurrence, officer changes, mergers, acquisitions and
divestitures.

 (Reporting by Arunima Kumar in Bengaluru; Editing by Arun
Koyyur)
 ((Arunima.Kumar@thomsonreuters.com; Twitter: https://twitter.com/Aru_Kumar94;))