Kimmeridge, an alternative asset manager focused on the energy sector, delivered to the SilverBow Resources Board of Directors a proposal to combine Kimmeridge Texas Gas (KTG) and SilverBow.
The KTG assets have an equity value of $1.1 billion and an expected enterprise value of $1.4 billion at closing of the proposed transaction.
The proposal states, "The proposed transaction would immediately create the largest public pure-play Eagle Ford shale operator with enhanced scale, a low-cost, high-margin production base, a strong and flexible balance sheet, and a clear path to compelling shareholder returns."
Under the terms of the proposal, Kimmeridge would contribute the KTG assets to SilverBow in exchange for 32.4 million shares priced at $34 per share. In addition, Kimmeridge will inject $500 million of fresh equity capital at the same price of $34 per share, in exchange for 14.7 million shares. At closing of the Transaction, Kimmeridge and its affiliates would own a majority of the outstanding shares of the combined company, with a total of 50.3 million shares of common stock (inclusive of Kimmeridge's current 3.3 million share position in SilverBow).
The transaction will be accretive to SilverBow shareholders. The $34 share price represents a premium of 8.5% over SilverBow's closing share price on March 11, 2024 and 21% over the 30-day volume-weighted average price of $28.12 as of March 11, 2024.
Kimmeridge has sufficient capital to fully finance the equity investment of $500 million and intends to use those funds to pay down SilverBow's existing long-term debt obligations. Kimmeridge has received highly confident letters from Barclays, RBC Capital Markets and other lenders with respect to the debt consideration required to facilitate the transaction.
