Activist investor Kimmeridge Energy Management Co. LLC has withdrawn its proposal to merge its natural gas-focused subsidiary with Eagle Ford Shale producer SilverBow Resources Inc.
The New York-based investment firm, which holds a 12.9% stake in SilverBow, in March proposed a tie-up between Kimmeridge Texas Gas LLC (KTG) and the Eagle Ford producer along with a $500 million investment.
In a letter to shareholders earlier this month, SilverBow’s board said it had reviewed the offer “and determined that the proposal undervalues SilverBow and would not be in the best interests of shareholders.”
Kimmeridge followed up on Tuesday by withdrawing the offer. It said it “sees no pathway toward a transaction” by the deadline set in the initial proposal.
According to Kimmeridge, the combined company could have been a leading Eagle Ford producer with pro forma 2025 production of about 1.075 Bcfe/d and an enterprise value of about $3.6 billion. The combined company also was estimated to have about 2 million metric tons/year of throughput capacity to South Texas liquefied natural gas markets, according to the firm.
In 2023, SilverBow was the sixth-largest operator in the South Texas play by natural gas production, based on the latest data from the Railroad Commission of Texas. During the fourth quarter conference call, management had indicated it would reduce some natural gas production this year in light of low prices, but it would target a 50% year/year increase in overall production to about 504 MMcfe/d by focusing on liquids.
Eagle Ford natural gas output is expected to decline in May month/month by 29 MMcf/d, according to the U.S. Energy Information Administration’s latest Drilling Productivity Report.
Spot natural gas prices for Texas Eastern S. TX averaged $1.340/MMBtu on Tuesday for Wednesday delivery, the lowest level recorded in more than a decade, according to NGI’s Daily Historical Data.
Next Steps
While the merger proposal is off the table, Kimmeridge said it would turn to focusing on “solutions for SilverBow’s broken governance.” In February, Kimmeridge nominated three people to SilverBow’s board.
“The only way SilverBow will maximize value for all shareholders and reach its long-term potential is by introducing new, independent, and experienced perspectives to the board,” Kimmeridge said.
SilverBow had said the Kimmeridge-backed nominations had been put forth in order to “force a combination between SilverBow and KTG.
“Its nominations were made after two years of extensive engagement between SilverBow and Kimmeridge regarding a potential combination, and Kimmeridge’s proxy fight is being pursued concurrently with its public proposal to combine the two companies,” SilverBow’s board said.
Kimmeridge’s portfolio includes several energy companies, including Denver-Julesburg Basin operator Civitas Resources Inc. and Permian Basin-focused Sitio Royalties Corp.
