KKR’s Independence Energy, Contango Oil & Gas aim for $5.5B all-stock merger

Melissa Karsh and Kiel Porter June 08, 2021
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(Bloomberg) --KKR & Co.’s Independence Energy and Contango Oil & Gas Co. are near an agreement to combine in an all-stock deal that could value the new business at about $5.5 billion, including debt.

The aim is to expand the combined firm’s oil and gas footprint, according to people with knowledge of the matter. The new company, which will be based in Houston and operate under a new name and ticker symbol, plans to seek a listing on the New York Stock Exchange, the people said.

A KKR spokesperson declined to comment, and a Contango representative couldn’t immediately be reached to comment. Talks are ongoing, and no deal has been reached. It’s possible talks will end without an agreement.

KKR and Contango are doubling down on investing in exploration and production companies as many in the sector seek to recover from years of poor returns amid the shale boom and bust. The combination will allow the merged company to reach greater scale, boost access to capital and drive down the cost of production, the people said.

Other recent examples of such deals include Pioneer Natural Resources Co.’s $6.4 billion purchase this year of DoublePoint Energy LLC and the planned acquisition of Crestone Peak Resources by peer Civitas Resources Inc.

Independence Energy shareholders will own the majority of the company, according to the people. Contango’s shares climbed 4.3% Monday to $5.62, and have more than doubled this year. It has a market value of about $1.1 billion.

New York-based KKR established Independence Energy in August 2020 to consolidate most of its energy assets as part of a private stock-for-stock acquisition. Independence 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.

David Rockecharlie, head of KKR Energy Real Assets, is expected to lead the new business and Contango Chairman John Goff, who is its largest shareholder, will be chairman of the combined company’s board. Contango CEO Wilkie Colyer and President Farley Dakan are expected to continue to manage Fort Worth, Texas-based Contango as an operating subsidiary of the new company and will focus on expanding through acquisitions.

Contango has completed four acquisitions in the last 18 months, including a November deal to buy assets in the Big Horn, Permian and Powder River basins via a bank-owned liquidation of assets.

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