PHX Minerals shares surge as WhiteHawk Energy reaffirms $4 acquisition offer

Shares of PHX Minerals Inc. (PHX) saw a notable rise after WhiteHawk Energy reiterated its offer to acquire the oil and gas royalty company for $4.00 per share in cash. The deal, offering a 19% premium to PHX’s 90-day volume-weighted average price and a 17% premium over its 30-day average, marks WhiteHawk’s continued efforts to engage with PHX after 18 months of attempts.

WhiteHawk Energy’s Strategic Bid

WhiteHawk Energy is a mineral and royalty company focused on natural gas. Its core strategy revolves around acquiring and managing high-quality natural gas mineral and royalty assets across key basins in the United States. This acquisition attempt aligns with its long-term plan to expand its asset base, leveraging the steady income generated by royalties from natural gas production. WhiteHawk has expressed dissatisfaction with PHX’s financial management, emphasising concerns over high general and administrative (G&A) expenses, lackluster dividends, and underperformance of the stock.

WhiteHawk already owns 2.5% of PHX’s outstanding stock, which lends credibility to its offer and suggests a vested interest in improving PHX’s future performance. The deal could potentially allow qualified PHX shareholders to exchange their stock for WhiteHawk shares, providing further upside if WhiteHawk’s operational efficiencies come into play.

PHX Minerals: A Brief Overview

PHX Minerals Inc., headquartered in Oklahoma City, operates as an oil and natural gas mineral company. Founded in 1926, the company engages in the acquisition and development of properties rich in oil and gas, primarily focusing on royalty interests. Unlike traditional exploration companies, PHX derives revenue without needing to finance costly drilling operations, instead earning from royalties on production from its properties. Over the years, the company has accumulated a diversified portfolio of mineral and royalty interests across the United States, with a strong presence in regions such as the Anadarko and Permian Basins.

However, despite its solid asset base, PHX has faced criticism for its lack of capital returns to shareholders. Since 2020, the company has spent over $40.1 million on G&A expenses while returning only $11.4 million in dividends. WhiteHawk has highlighted this imbalance as part of its reasoning for the acquisition offer.

Shareholder Value at the Centre of Attention

WhiteHawk’s offer not only highlights the company’s strategic intent but also raises significant governance questions about PHX’s management. Many shareholders may find the proposed $4.00 per share price appealing, given that PHX’s stock has struggled in recent years. The offer surpasses the company’s 52-week high and exceeds its closing price on 98% of trading days since 2021, providing an opportunity for investors to realise gains.

Standoff Between the Companies

Despite the attractive premium, PHX has been reluctant to engage in meaningful discussions with WhiteHawk. The two companies have been at an impasse, with PHX’s board rejecting previous offers. The repeated rejections without substantial engagement have drawn criticism from analysts and shareholders alike. WhiteHawk’s decision to go public with the offer may be a strategic move to apply pressure on PHX’s board and rally support from frustrated shareholders.

Market Reaction and Potential Outcomes

Following WhiteHawk’s reiterated offer, PHX shares rose by more than 5%, indicating positive sentiment among investors. Analysts suggest that should PHX’s board continue to resist, WhiteHawk may resort to a proxy contest or other means of influencing the company’s governance. This ongoing standoff could have implications for PHX’s future, with the potential for shareholder activism to drive significant changes in corporate strategy.

For PHX shareholders, the offer presents an attractive exit strategy, particularly for those who have been disappointed by the company’s recent financial performance. However, the long-term benefits of WhiteHawk’s acquisition proposal remain uncertain, especially given the complexity of integrating the two companies’ portfolios.

What’s Next for PHX Minerals?

PHX’s board will need to carefully evaluate WhiteHawk’s offer against the company’s standalone prospects. Shareholders are now left wondering whether management can present a credible plan for value creation, or if WhiteHawk’s acquisition could be a more attractive option. As the situation evolves, the focus will remain on shareholder value and whether PHX’s board will engage in further discussions.