SilverBow Resources acquires Chesapeake Energy’s assets in South Texas for $700m

SilverBow Resources, Inc. (NYSE: SBOW) announced the closing of a major acquisition, purchasing Chesapeake Energy Corporation’s (NASDAQ:CHK) oil and gas assets in South Texas. The deal, valued at $700 million, includes a $650 million upfront cash payment and an additional $50 million deferred cash payment, subject to customary adjustments. This strategic move, known as the Chesapeake Transaction, was funded with cash on hand, borrowings under the Credit Facility, and proceeds from the sale of additional second lien notes. Chesapeake may also receive up to $50 million in additional contingent cash consideration based on future commodity prices. SilverBow also provided updated 2023 guidance and a preliminary 2024 outlook as part of this announcement.

Sean Woolverton, CEO of SilverBow, expressed excitement about the acquisition, which significantly increases the company’s scale in South Texas and transforms it into the largest public pure-play Eagle Ford operator. Woolverton highlighted SilverBow’s growth and acquisition strategy, focusing on a stronger balance sheet, a broader commodity mix, and a portfolio across a single, geographically advantaged basin. The acquired assets are expected to enhance SilverBow’s optionality for capital allocation to high-return projects and contribute to strong production growth and significant free cash flow.

SilverBow Resources Expands South Texas Footprint with $700 Million Chesapeake Energy Purchase

Deal Background: Announced in August 2023, SilverBow Resources agreed to acquire Chesapeake Energy’s oil and gas assets in South Texas. The deal, solidified at $700 million, comprises an upfront cash payment of $650 million at closing and a $50 million deferred cash payment one year post-close. Chesapeake Energy may receive an additional $50 million contingent on future commodity prices.

Chesapeake Bids Adieu to Eagle Ford: Chesapeake Energy Corporation confirmed the transaction, marking its strategic exit from the Eagle Ford assets. With this sale, Chesapeake’s total earnings from the Eagle Ford departure exceed $3.5 billion. Chesapeake’s CEO, Nick Dell’Osso, commented on the successful divestiture and the focus shift to Marcellus and Haynesville positions.

The acquisition includes approximately 42,000 net acres and 540 wells in the Eagle Ford region within Dimmit and Webb counties, along with the associated property, plant, and equipment. The daily average net production from these sites was about 29,000 barrels of oil equivalent (boe), with 60% liquid, contributing to $50 million in EBITDAX. The net proven reserves were estimated at 124 million barrels of oil equivalent (mmboe).

The completion of this acquisition, with an effective date of February 1, 2023, is expected by the end of 2023, contingent upon standard closing conditions. This includes the accuracy of representations from both parties, compliance with major covenants, and obtaining necessary consents.