Kimmeridge is withdrawing from its proxy fight with SilverBow Resources Inc. in light of the company’s pending sale to Crescent Energy Co. for $2.1 billion. But in a parting shot at SilverBow, Kimmeridge, an alternative asset manager, took credit for spurring the deal.
Kimmeridge’s withdrawal ends months of infighting between SilverBow and Kimmeridge, the Eagle Ford Shale E&P's largest shareholder with 12.9% of the company’s outstanding shares. Kimmeridge had put forth a slate of three board candidates for consideration at SilverBow’s annual meeting on May 21, which has since been rescheduled for May 29.
“We are thankful for the overwhelming support of Kimmeridge's slate of independent board nominees from the investment community, which helped catalyze this transaction. We believe that the proposed sale of the company obviates the need for board change at this time," Ben Dell, co-founder and managing partner of Kimmeridge, said in a May 22 press release.
SilverBow shareholders will receive $38 per share under the terms of the deal—a 17% premium to the company’s prior-day close. Consideration will include 3.125 shares of Crescent stock for each SilverBow share; SilverBow shareholders are also able to elect to be paid in cash up to a total of $400 million.
Dell said that while he was disappointed that SilverBow's board did not appear to have run a comprehensive sales process, “our campaign was always underpinned by a strong belief that consolidation is in the best interests of shareholders.”
Dell added that’s why Kimmeridge, beginning in February, took the time to privately outline to the SilverBow board eight potential strategic transactions the company should consider to drive value creation.
SilverBow rejected an offer by Kimmeridge to combine SilverBow with Eagle Ford affiliate Kimmeridge Texas Gas (KTG). Kimmeridge ultimately withdrew the offer.
East Daley noted the stakes were high in South Texas in the Kimmeridge–SilverBow battle. KTG is an investor in Commonwealth LNG and has signed a multi-year transportation agreement with Kinder Morgan Texas Pipeline in support of that project.
The Crescent Energy deal, by contrast, creates a more diversified pro forma, with drilling locations in the Rockies and Eagle Ford and estimated 2024 production of 250,000 boe/d.
Crescent also has a large footprint in Utah’s Uinta Basin, where it holds around 434,000 net acres, according to regulatory filings.
A combination with KTG would have created an Eagle Ford company with a 2025 estimated production of 180,000 boe/d.
Stephen Trauber, managing director, chairman and global head of energy and clean technology for Moelis & Co., echoed those thoughts at Hart Energy’s SUPER DUG Conference & Expo. While the Crescent Energy-SilverBow deal appears to be a good strategic fit, he was surprised by the abbreviated sales process.
“To be fair, I'm a little surprised at the announcement now because I think a lot of people knew that Evercore was running a quiet process on SilverBow … There were a number of other people looking at it and they [SilverBow] didn't wait for others to submit offers. … I wouldn't be surprised if somebody else comes in with a higher offer.”
He added that SilverBow “needed to do something in light of what Kimmeridge was attempting to do” regarding the Eagle Ford companies’ proxy fight.