The Zhitong Finance App learned that Sapic Energy (CHK.US), the largest gas producer in the US, said on Monday local time that after completing the divestiture of oil assets last year, the company plans to begin layoffs this week. Some analysts believe this move may be to prepare for “cost reduction” for future mergers and acquisitions, and to optimize the organizational structure to maximize profits before electricity consumption surges in the AI era. Chesapeake Energy said this week's layoffs followed the divestment of Eagle Ford-related assets, not after the company's impending merger with Southwest Energy (SWN.US). The company did not specify the size or scope of the layoffs.
As early as 2022, Chesapeake Energy said it would withdraw from the Eagle Ford shale gas field in southern Texas in the US and strive to become a pure large-scale natural gas producer.
In early 2023, Chesapeake Energy sold some of its assets to INEOS Energy (INEOS Energy) for approximately $1.4 billion, and sold the remaining assets to SilverBow Resources later in the same year for approximately $700 million, thus announcing the completion of the divestment.
The company, which is headquartered in Russia, Oklahoma, is completing a whopping $7.4 billion merger with Southwest Energy. The deal is expected to close in the second half of this year, later than initially anticipated after the Federal Trade Commission (Federal Trade Commission) requested more information.
According to reports, after the merger, the new company will become the largest natural gas producer in many US states, beating EQT Energy in terms of production volume, market value, and corporate value. At that time, it will have a larger natural gas production capacity, with an estimated daily net production volume of about 7.9 billion cubic feet. This will give the new company greater bargaining power and competitive advantage in the market. After the merger, some analysts expect operating and management cost savings of around $400 million each year, mainly through more efficient drilling and completion operations, longer horizontal well sections, and the use of shared operating infrastructure.
Since this year, US gas producers have been hit by low oil prices. Due to high inventories and weaker demand than expected, the US gas benchmark price fell by about 20% in the first quarter. As a result, Chesapeake Energy's latest profit indicators fell short of Wall Street analysts' general expectations. In response, many companies, including Chesapeake, cut gas production.
As part of the deal, the company will replace current general counsel Benjamin Russ with Southwest General Counsel Chris Lacey, as part of the deal.
Furthermore, Wells Fargo Bank, a major Wall Street bank, recently released a report saying that it is expected that with artificial intelligence driving a sharp increase in global electricity consumption, it may be difficult to meet the electricity needs of society by relying on renewable energy alone in the future. In this context, Wells Fargo expects gas demand to grow substantially over the next ten years.
Wells Fargo predicts that by 2030, US gas demand may increase by 10 billion cubic feet per day, which is 28% more than the current gas consumption for electricity generation in the US, accounting for 10% of the total daily natural gas consumption in the US. Wells Fargo also predicts that by 2030, AI data centers alone are expected to increase US electricity demand by about 323 terawatt-hours, which is seven times higher than New York City's current annual electricity consumption of 48 terawatt-hours.
Energy analysis agency Rystad Energy said that in the future, a clean energy source will be needed that can continue to fill the supply gap when renewable energy generation is insufficient, because solar and wind energy may not be sufficient to meet the high-intensity power load of AI data centers due to their own unstable properties. In this situation where electricity supply is in short supply, energy industry giants are generally betting on the trend of surging AI power consumption, and natural gas with clean energy properties will become the first alternative for renewable energy.