Energy-focused alternative asset manager Kimmeridge has made a fresh offer to acquire US-based upstream company SilverBow Resources at $34 per share and subsequently combine it with Kimmeridge Texas Gas (KTG).
The assets of Kimmeridge-owned Kimmeridge Texas Gas are valued at $1.1bn. Following the completion of the proposed deal, the anticipated enterprise value of the combined firm will be $1.4bn.
Kimmeridge is already a shareholder in SilverBow Resources, holding 12.9% of outstanding shares in the latter, which is presently listed on the New York Stock Exchange (NYSE). In the past, the asset manager attempted to take over upstream company but could not succeed.
Based in Houston, SilverBow Resources is active in South Texas through the exploration, development, and production of oil and gas in the Eagle Ford Shale and Austin Chalk. The company holds an acreage of around 220,000 net acres in Eagle Ford with nearly 1,000 gross horizontal locations, as of the end of 2023.
On the other hand, Kimmeridge Texas Gas has acquired approximately 148,000 net acres in Texas, covering the dry gas window of the Eagle Ford Shale in Webb and McMullen counties. The company`s daily production amounts to roughly 315 million cubic feet equivalent of oil and natural gas.
According to the proposal`s terms, Kimmeridge plans to transfer its Kimmeridge Texas Gas assets to SilverBow Resources in return for 32.4 million shares. Additionally, Kimmeridge plans to invest $500m in fresh equity capital at the same share price of $34, to acquire 14.7 million shares.
Upon the completion of the transaction, Kimmeridge and its affiliates would collectively hold a majority stake in the merged entity with a total of 50.3 million shares of common stock. This figure includes Kimmeridge`s existing 3.3 million shareholding in SilverBow Resources.
The offered consideration presents an 8.5% premium above the closing share price of SilverBow Resources on 11 March 2024, and a 21% premium over the 30-day volume-weighted average price of $28.12 as of the same date.
In an open letter to SilverBow Resources’ shareholders, Kimmeridge stated: “The proposed Transaction would immediately create the largest public pure-play Eagle Ford shale operator with enhanced scale, a low-cost, high-margin production base, a strong and flexible balance sheet, and a clear path to compelling shareholder returns.
“We believe all shareholders will benefit from the opportunity to participate in the compelling upside of a larger and more resilient company that is uniquely positioned to drive growth and lead the next phase of consolidation in the Eagle Ford.”
In response to the offer, SilverBow Resources said that, in collaboration with its financial and legal advisors, the board of directors will thoroughly assess and deliberate on the proposal. This will be to decide on the course of action deemed most advantageous for the company and its shareholders.
