Kimmeridge proposes acquisition of SilverBow Resources to create Eagle Ford Shale powerhouse

Kimmeridge, an energy-focused alternative asset manager, has put forward a fresh offer to acquire SilverBow Resources, a US-based upstream company, for $34 per share. This move aims to combine SilverBow Resources with Kimmeridge’s own Kimmeridge Texas Gas (KTG), valuing the proposed combined entity at an impressive enterprise value of $1.4 billion. The offer by Kimmeridge represents a significant step in the consolidation of assets within the Eagle Ford Shale region, reflecting an 8.5% premium over SilverBow Resources’ closing share price on March 11, 2024, and a 21% premium over its 30-day volume-weighted average price.

The proposal suggests that Kimmeridge, which already owns 12.9% of SilverBow Resources’ outstanding shares, seeks to strengthen its position in the energy market. This acquisition attempt follows a previously unsuccessful bid, highlighting Kimmeridge’s persistent interest in expanding its footprint in the Eagle Ford Shale and Austin Chalk regions. SilverBow Resources, based in Houston, boasts an extensive operation with around 220,000 net acres in Eagle Ford, positioning it as a significant player in oil and gas exploration, development, and production in South Texas.

Kimmeridge Texas Gas, holding approximately 148,000 net acres in Texas, complements SilverBow Resources’ operations with its focus on the dry gas window of the Eagle Ford Shale. The daily production from Kimmeridge Texas Gas stands at an estimated 315 million cubic feet equivalent of oil and natural gas, underlining the potential for enhanced scale and operational efficiency post-merger. The proposed deal involves Kimmeridge transferring its assets to SilverBow in exchange for 32.4 million shares and an additional $500 million in fresh equity capital to acquire 14.7 million shares at the same price of $34 per share.

Upon completion, the merger would position Kimmeridge and its affiliates as majority stakeholders in the new entity, with a collective holding of 50.3 million shares of common stock. This strategic consolidation aims to create the largest public pure-play Eagle Ford shale operator, boasting a low-cost, high-margin production base and a robust balance sheet. According to Kimmeridge’s open letter to SilverBow Resources’ shareholders, this transaction promises to deliver compelling shareholder returns through a “larger and more resilient company” poised for growth and leadership in the Eagle Ford consolidation phase.

SilverBow Resources has acknowledged the offer, with its board of directors set to thoroughly assess the proposal in collaboration with financial and legal advisors. This deliberation process will focus on determining the action most beneficial for the company and its shareholders, marking a critical juncture in the potential reshaping of the Eagle Ford Shale operational landscape.

This proposal by Kimmeridge to acquire SilverBow Resources could mark a transformative moment in the energy sector, especially within the Eagle Ford Shale region. It highlights a trend towards consolidation in the industry, aiming to create entities with greater operational efficiencies, lower production costs, and enhanced shareholder value. For investors and stakeholders, this development signals a noteworthy shift towards strategic mergers and acquisitions as companies seek to optimize resources and capitalize on the growing demand for energy.