HOUSTON and CALGARY, AB - Chord Energy Corporation (NASDAQ: CHRD) and Enerplus (TSX:ERF) Corporation (TSX: NYSE:ERF) (NYSE: ERF) have announced an agreement to merge in a transaction valued at approximately $11 billion. The deal, which includes stock and cash considerations, will result in a combined entity with significant operations in the Williston Basin, boasting a joint production of 287,000 barrels of oil equivalent per day (Boepd) as of the fourth quarter of 2023.
The terms of the arrangement will see Enerplus shareholders receive 0.10125 shares of Chord common stock and $1.84 in cash for each Enerplus share. Post-merger, Chord shareholders will own about 67% of the new company, with Enerplus shareholders holding the remaining 33%. The combined company's enterprise value includes Enerplus' net debt and is based on the closing share prices as of February 20, 2024.
Danny Brown, President and CEO of Chord Energy, will lead the merged company, while Ian Dundas, President and CEO of Enerplus, will serve as an advisor to the CEO and join the board along with three additional Enerplus directors. The combined company is expected to realize up to $150 million in annual cost synergies, with an after-tax present value of these synergies estimated to exceed $750 million.
The merger is anticipated to be immediately accretive to key financial metrics, including cash flow per share and free cash flow per share, among others. The combined entity aims to maintain a strong balance sheet with low leverage and is committed to returning capital to shareholders, with an expected free cash flow of $1.2 billion in 2024.
Both companies have emphasized their commitment to environmental, social, and governance (ESG) excellence and the adoption of best practices from each organization. The transaction, already approved by both boards of directors, is expected to close by mid-year 2024, subject to shareholder and regulatory approvals.
The announcement of the merger coincides with a joint conference call hosted by the companies to discuss the transaction. This news is based on a press release statement and does not include personal opinions or speculative commentary.
InvestingPro Insights
In light of the recent merger announcement between Chord Energy Corporation and Enerplus Corporation, investors are keenly observing Chord's financial health and market performance. According to InvestingPro data, Chord Energy's market capitalization stands at a robust $6.93 billion, with a notably low price-to-earnings (P/E) ratio of 6.34, which further adjusts down to 5.73 when looking at the last twelve months as of Q3 2023. This low P/E ratio suggests that the stock may be undervalued relative to its earnings, making it an attractive option for value investors.
The company's revenue growth over the last twelve months has been impressive at 24.22%, highlighting its ability to expand effectively. However, it's worth noting that the quarterly revenue growth did see a contraction of 4.92% in Q3 2023. Despite this, Chord's gross profit margin remains strong at 57.33%, reflecting the company's efficiency in managing its cost of goods sold and maintaining profitability.
From an investment standpoint, InvestingPro tips indicate that Chord Energy pays a significant dividend to shareholders, with a current dividend yield of 7.07%, which is compelling for income-focused investors. The company also trades with low price volatility, adding a layer of stability to investment portfolios. These factors, combined with the fact that Chord's stock is trading near its 52-week high, may provide confidence to investors considering the stock amidst the merger developments.
For those looking to delve deeper into Chord's financials and future prospects, InvestingPro offers additional insights and tips. Currently, there are 9 more tips available on the InvestingPro platform, which can be accessed at: https://www.investing.com/pro/CHRD. For readers interested in an in-depth analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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