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SilverBow (SBOW) to Deliberate on Kimmeridge's $2.1B Offer
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SilverBow Resources, Inc. has received an offer from asset manager Kimmeridge Energy Management, whereby the latter wants to acquire it at $34 per share. Kimmeridge proposes to merge the U.S.-based upstream player with its gas-producing assets, Kimmeridge Texas Gas (“KTG”). The total consideration of the offer was $2.1 billion, including debt.
The consideration offered by Kimmeridge represents an 8.5% premium over the closing share price of SilverBow Resources on Mar 11, 2024. Additionally, it represents a 21% over the 30-day volume-weighted average price of the company's shares as of the same date.
Over the past two years, Kimmeridge has made several unsuccessful attempts at integrating SilverBow with Kimmeridge-owned KTG. The assets of Kimmeridge Texas Gas are valued at $1.1 billion. Following the close of the proposed deal, the expected enterprise value of the combined entity will be $1.4 billion. Kimmeridge is the largest shareholder of SilverBow, owning 12.9% of the outstanding shares.
Per the terms of the proposal, Kimmeridge intends to transfer KTG assets to SilverBow, in exchange for 32.4 million shares. Additionally, Kimmeridge intends to further invest $500 million in SilverBow to issue fresh equity capital at a price of $34 per share, which will allow the former to acquire an additional $14.7 million shares.
Upon the deal’s closure, Kimmeridge would own the majority of the combined firm for a total of 50.3 million shares of common stock. Kimmeridge would also have the right to choose five out of the nine directors of the merged entity’s board.
Following the proposed merger, Kimmeridge anticipates the combined company to trade at $60-$65 per share. Additionally, the asset management firm believes that the merger would improve SilverBow’s financial position and enable the upstream player to start paying dividends and pursue acquisition opportunities in the future.
The merger would create one of the leading energy players focused on the prolific Eagle Ford shale formation. Furthermore, the entity would benefit from economies of scale and a favorable geographic location that would allow it to supply key liquefied natural gas from export terminals situated on the Gulf Coast.
In an open letter to SilverBow’s shareholders, Kimmeridge stated that the proposed transaction would result in the largest public pure-play operator focused on the Eagle Ford shale that would benefit from enhanced scale and a low-cost, high-margin production base. Furthermore, the merger would be strengthening the combined firm’s balance sheet, providing financial flexibility and paving the way for compelling shareholder returns.
In response to Kimmeridge’s offer, SilverBow stated that the company’s board of directors would thoroughly assess and deliberate on the proposal to decide on the best course of action that would benefit the company and its shareholders.
SilverBow is actively involved in the exploration, development, and production of oil and gas in the Eagle Ford Shale and Austin Chalk. As of 2023-end, the company owned around 220,000 net acres in Eagle Ford, with nearly 1,000 gross horizontal locations.
KTG, on the other hand, owns 148,000 net acres in Texas, covering the dry gas window of the Eagle Ford Shale in Webb and McMullen counties. It boasts an average daily production of around 315 million cubic feet, equivalent to oil and natural gas.
Zacks Rank and Key Picks
Currently, SBOW carries a Zacks Rank #5 (Strong Sell).
Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. With a pipeline network extending more than 125,000 miles, its network spans over 44 states. With a presence in all the major U.S. production basins, the partnership’s outlook seems positive.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The company distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Sunoco’s current dividend yield is greater than the composite stocks belonging to the industry. SUN could be a preferred stock for income-focused investors who seek consistent returns.
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SilverBow (SBOW) to Deliberate on Kimmeridge's $2.1B Offer
SilverBow Resources, Inc. has received an offer from asset manager Kimmeridge Energy Management, whereby the latter wants to acquire it at $34 per share. Kimmeridge proposes to merge the U.S.-based upstream player with its gas-producing assets, Kimmeridge Texas Gas (“KTG”). The total consideration of the offer was $2.1 billion, including debt.
The consideration offered by Kimmeridge represents an 8.5% premium over the closing share price of SilverBow Resources on Mar 11, 2024. Additionally, it represents a 21% over the 30-day volume-weighted average price of the company's shares as of the same date.
Over the past two years, Kimmeridge has made several unsuccessful attempts at integrating SilverBow with Kimmeridge-owned KTG. The assets of Kimmeridge Texas Gas are valued at $1.1 billion. Following the close of the proposed deal, the expected enterprise value of the combined entity will be $1.4 billion. Kimmeridge is the largest shareholder of SilverBow, owning 12.9% of the outstanding shares.
Per the terms of the proposal, Kimmeridge intends to transfer KTG assets to SilverBow, in exchange for 32.4 million shares. Additionally, Kimmeridge intends to further invest $500 million in SilverBow to issue fresh equity capital at a price of $34 per share, which will allow the former to acquire an additional $14.7 million shares.
Upon the deal’s closure, Kimmeridge would own the majority of the combined firm for a total of 50.3 million shares of common stock. Kimmeridge would also have the right to choose five out of the nine directors of the merged entity’s board.
Following the proposed merger, Kimmeridge anticipates the combined company to trade at $60-$65 per share. Additionally, the asset management firm believes that the merger would improve SilverBow’s financial position and enable the upstream player to start paying dividends and pursue acquisition opportunities in the future.
The merger would create one of the leading energy players focused on the prolific Eagle Ford shale formation. Furthermore, the entity would benefit from economies of scale and a favorable geographic location that would allow it to supply key liquefied natural gas from export terminals situated on the Gulf Coast.
In an open letter to SilverBow’s shareholders, Kimmeridge stated that the proposed transaction would result in the largest public pure-play operator focused on the Eagle Ford shale that would benefit from enhanced scale and a low-cost, high-margin production base. Furthermore, the merger would be strengthening the combined firm’s balance sheet, providing financial flexibility and paving the way for compelling shareholder returns.
In response to Kimmeridge’s offer, SilverBow stated that the company’s board of directors would thoroughly assess and deliberate on the proposal to decide on the best course of action that would benefit the company and its shareholders.
SilverBow is actively involved in the exploration, development, and production of oil and gas in the Eagle Ford Shale and Austin Chalk. As of 2023-end, the company owned around 220,000 net acres in Eagle Ford, with nearly 1,000 gross horizontal locations.
KTG, on the other hand, owns 148,000 net acres in Texas, covering the dry gas window of the Eagle Ford Shale in Webb and McMullen counties. It boasts an average daily production of around 315 million cubic feet, equivalent to oil and natural gas.
Zacks Rank and Key Picks
Currently, SBOW carries a Zacks Rank #5 (Strong Sell).
Investors might want to look at some better-ranked stocks in the energy sector, such as Energy Transfer LP (ET - Free Report) , Archrock, Inc. (AROC - Free Report) and Sunoco LP (SUN - Free Report) . Energy Transfer, Archrock and Sunoco presently sport a Zacks Rank #1 (Strong Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. With a pipeline network extending more than 125,000 miles, its network spans over 44 states. With a presence in all the major U.S. production basins, the partnership’s outlook seems positive.
Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.
Sunoco LP is one of the largest distributors of motor fuel in the United States. The company distributes fuel to independent dealers, commercial customers, convenience stores as well as distributors. Sunoco’s current dividend yield is greater than the composite stocks belonging to the industry. SUN could be a preferred stock for income-focused investors who seek consistent returns.