Kimmeridge Energy makes offer to buy SBOW - Mar 13

[dan_s]

SilverBow rejected Kimmeridge's previous offer, but this one might have a chance. I'm sure there will be more negotiations.

March 13 (Reuters) - Kimmeridge Energy Management has submitted a new offer to acquire SilverBow Resources that values the U.S. oil and gas producer at close to $2.1 billion, including debt, according to people familiar with the matter.

The offer is a variation of previous unsuccessful bids for SilverBow that Kimmeridge has mounted over the last two years, the sources said. It would combine SilverBow with Kimmeridge's gas-producing assets in South Texas, which Kimmeridge values at about $1.4 billion, including debt, the sources added.

Under the proposal which Kimmeridge has made to SilverBow's board of directors, SilverBow shareholders would be rolling their equity into the combined company at a valuation of $34 per share, according to the sources. SilverBow shares ended trading on Tuesday at $31.72.

As well as contributing its South Texas assets, Kimmeridge would inject $500 million into the combined company to help pay down debt, the sources said. The investment firm would own a majority of the combined company, which would remain publicly listed, they added.

SilverBow said in an open letter to its shareholders on March 1 that it entertained Kimmeridge's previous overtures since July 2022 in vain, because Kimmeridge could not secure the necessary financing.

Kimmeridge's latest offer includes letters from financial institutions that have indicated they are confident they can bankroll the deal, the sources said.

A SilverBow spokesperson did not immediately respond to a request for comment on Kimmeridge's latest offer. A Kimmeridge spokesperson also did not immediately respond.

Kimmeridge is the largest shareholder in SilverBow with a 12.9% stake. Last month, Kimmeridge said it would nominate three directors to join SilverBow's board at its annual shareholder meeting. It said in November it backed calls by another large SilverBow shareholder, Riposte Capital, for board changes to address governance and performance concerns.

SilverBow's operations are in the Eagle Ford shale formation in south Texas, adjacent to Kimmeridge's assets. The tie-up would create one of the biggest energy producers solely focused on the Eagle Ford, which would leverage better economies of scale and whose location makes it favorable for supplying key export terminals for liquefied natural gas on the Gulf coast. (Reporting by David French in New York; Editing by Stephen Coates)

[Fraser921]

You valuation released yesterday was $ 58. Why should SBOW sell at 34 and get paid with crappy ng assets?
Didn't they get your memo?

i would tell Kimmeridge to sell their gassy assets and come back with an all cash bid

[mrbill]

Offer diverges too much from Dan's recent valuation IMHO. It was up at $43USD shr. a few months back.
SBOW does not seem desperate to sell for whatever reason. Is this just a wordy, slick, "lowball" attempt?

[dan_s]

As I have posted here MANY TIMES > Mergers are not comparable to cash offers.

This is not a cash offer. It is a merger that might create a more valuable company. Sizes matters in this business. SilverBow is not in financial distress, so they have a lot of negotiating leverage.

My valuations are based on what I believe would be fair CASH PRICE for the shares.

[Fraser921]

MrBILL, yes i view this as a sleezly low ball offer and if i held sbow, id vote no

How does a shareholder know what kimmeridge NG assets are worth? Take their word??

Crude is improving near 80 and NG going no where. Why would you take NG assets for oily assets.

I have no idea what kimmeridge assets are worth. thats why i said go sell them and come back with cash

[Fraser921]

Its a merger in name only its a takeunder. They get the board seats and current management and BOD goes away and Kimmeridge gets control and a listing for a bag of donuts. It's not a merger

Kimmeridge isn't a public traded entity where you at least have the market to value their business

[Fraser921]

Dan , How can you say 34 is fair when yesterday you said it's worth 58?

And current shareholders dont get 34, they get nothing, They dont get kimmeridge stock, They dont get taken out. They get a new bOD and new mgt and more gassy assets. They dont receive one penny

You liked this name as they were focusing on the oily holdings. This is a step backwards, imho

I'd rather bet on oil than NG

PS. their valuation slides was 2.6 x on cash flow, the only reason Kimmeridge had relatively good cash flow with their crappy NG assets is they had hedges in place. they probably roll off and so will the resultant cash flow. they threw out 1.b value on their assets . What happens if they are only worth 250 k?

i dont have a position in this name so i could care less. This is just my humble opinion. Im supposed to trust them what they offer is fair?

[allen46]

Thanks FRASER, I totally agree with your assessment. This is a very lousy deal.

[dan_s]

Guys PLEASE wait to see what the SilverBow BOD does. They rejected the previous offer, and they are not in dire need of do a deal. IMO SilverBow holds the upper hand in this negotiation.

[ChuckGeb]

In my view, the perfect merger candidate for SBOW is Magnolia. Magnolia is very conservatively managed and typically has a lot of cash (dry powder) in their Treasury. That said it seems like Magnolia is happy with small bolt-ons and organic growth. Further in that SBOW has been in a buying spree the last couple of years, their best strategy would be to prove up their acquisitions and build some credible following. In the meantime as the Gulf Coast LNG corridor comes on stream SBOW is poised to unleash their Webb County gas assets on the coattails of EOG.