SilverBow Resources to acquire Chesapeake’s South Texas assets for $700m

SilverBow Resources, Inc. (NYSE: SBOW) has officially inked an agreement to procure the oil and gas assets located in South Texas from Chesapeake Energy Corporation (NASDAQ:CHK). The deal is solidified at a comprehensive purchase price of $700 million. This amount includes an immediate upfront cash payment of $650 million due upon the deal’s closure and a subsequent deferred payment of $50 million, to be settled a year post closure. Additionally, based on future commodity pricing, Chesapeake Energy may be entitled to another cash consideration, up to $50 million.

Chesapeake Bids Adieu to Eagle Ford

Chesapeake Energy Corporation has confirmed this transaction, highlighting its strategic exit from the Eagle Ford assets. With this sale to SilverBow Resources, Chesapeake Energy’s total earnings from the Eagle Ford departure escalates to an impressive figure exceeding $3.5 billion. Chesapeake Energy President and CEO, Nick Dell’Osso, remarked on the successful divestiture, stating, “We are pleased to have successfully completed the exit of our Eagle Ford asset, allowing us to focus our capital and team on the premium rock, returns and runway of our Marcellus and Haynesville positions.” Nick Dell’Osso extended gratitude to the dedicated workforce for fostering a safety and excellence-driven environment, amplifying the asset’s value.

The specifics of the acquisition encompass approximately 42,000 net acres and an estimated 540 wells situated in the condensate-rich region of Eagle Ford within Dimmit and Webb counties. This package also entails the associated property, plant, and equipment. Records from Q2 2023 show that the daily average net production from these sites stood at around 29,000 barrels of oil equivalent (boe), where 60% was liquid. This production translated to roughly $50 million in EBITDAX. As of December 31, 2022, the net proven reserves related to these properties were calculated at about 124 million barrels of oil equivalent (mmboe).

To mark the acquisition completion, stipulated terms dictate an effective date of February 1, 2023. The expectation is to finalize the entire Chesapeake Energy Transaction by the end of 2023, contingent on the adherence to specified customary closing conditions. These include the precision of the representations and assurances from both parties, consistent compliance with all major covenants, and acquiring certain consents.