SilverBow Resources (SBOW) Update - Oct 3

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

SilverBow Resources (SBOW) Update - Oct 3

Post by dan_s »

I have updated the SilverBow forecast/valuation model for the DeWitt / Gonzales Acquisition they announced today and posted it to the EPG website. The model assumes that it will close in November adding 1,100 Boepd (44% oil).

My valuation is still $105/bbl, but the additional "running room" should justify a higher valuation multiple. I will wait until I see Q3 results to make that adjustment.

Note that TipRanks' Q3 and Q4 revenues and Net Income are much higher than what my model shows. TipRanks' 2023 forecasts of $19.49 EPS and $29.83 operating cash flow per share definitely point to a much higher share price.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: SilverBow Resources (SBOW) Update - Oct 3

Post by ChuckGeb »

This acquisition seems to be a bit of a one-off with no apparent sizzle. The acreage is in their EasternnEagle Ford where they allocated $13 million for 2 wells in 2022. With just a 2 rig drilling program this acreage is remotely located away from the core positions they expanded in 2022. I guess it is yet to be seen what the plans are but their other bolt-ohs make a lot more sense.
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: SilverBow Resources (SBOW) Update - Oct 3

Post by dan_s »

From the Houston Business Journal online.

SilverBow Resources Inc. (NYSE: SBOW) continues to grow its position in South Texas.

The Houston-based oil and gas company inked an $87 million cash deal to acquire assets in DeWitt and Gonzales counties from an undisclosed buyer. The transaction is expected to close during the fourth quarter.

The deal will add 5,200 net acres in the Eagle Ford and Austin Chalk formations to SilverBow's portfolio in South Texas, including new acreage and incremental working interest on the company's existing acreage. The new assets — 44% of which are oil assets — had net production of approximately 1,100 barrels of oil equivalent per day as of June, SilverBow said.

"This transaction fits our disciplined growth strategy of adding production at attractive valuations and increasing our high-quality inventory across both the Eagle Ford and Austin Chalk formations," said SilverBow CEO Sean Woolverton.

SilverBow said it plans to fund the acquisition and related expenses with cash on hand and borrowings under its revolving credit facility.

The latest deal in the Eagle Ford Shale and Austin Chalk is the seventh transaction SilverBow has announced since August 2021.

"The enhanced economics from this transaction supports further oil development in this area in 2023," Woolverton said.

SilverBow announced adding acreage in the Dorado play of Webb County in September. The company closed a $354 million acquisition of nearly all of Denver-based Sundance Energy Inc.'s oil and gas assets in July. In May, SilverBow closed its $71 million acquisition of certain assets from a subsidiary of San Antonio-based SandPoint Resources LLC.

Woolverton told the Houston Business Journal in April 2021 he expected the company’s opportunities for growth would come largely from mergers and acquisitions in South Texas in future years.

Gibson, Dunn & Crutcher LLP advised SilverBow in its acquisition of the assets in DeWitt and Gonzales counties.

Activist investor
Meanwhile, SilverBow has taken steps to stave off a potential takeover by an activist investor. New York-based Kimmeridge Energy Management disclosed accumulating a 14.7% stake in SilverBow in a Sept. 23 filing with the U.S. Securities and Exchange Commission. Kimmeridge said it intends to engage with SilverBow's board and management "about a broad range of operational and strategic matters," including financing, strategy and other operations.

The SilverBow board adopted a limited-duration stockholder rights plan, commonly known as a poison pill measure, on Sept. 20. The plan aims to dilute the ownership in SilverBow of any shareholder that acquires more than 15% of the company’s shares.

The poison pill will be in effect at least until SilverBow's shareholders get a chance to vote on it at the upcoming annual shareholder meeting, which is typically held in May.

"SilverBow’s board is committed to acting in the best interests of all of the company’s stockholders and will continue to take actions that we believe will drive long-term value," said Marcus C. Rowland, SilverBow's independent board chairman.
Dan Steffens
Energy Prospectus Group
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