SilverBow Assets Inc. has written to shareholders urging them to vote for its incumbents for the SilverBow board and shun individuals put ahead by disgruntled investor Kimmeridge Vitality Administration Co. LLC.
Because the Could 21 annual shareholder assembly nears, New York Metropolis-based Kimmeridge assailed Houston-based SilverBow’s acquisition document and nominated three names for unbiased director roles saying they’ve the experience to treatment SilverBow’s progress technique.
Kimmeridge, an asset supervisor targeted on the vitality trade, has taken subject with the rejection by SilverBow’s board of administrators of Kimmeridge’s proposal to merge Kimmeridge Texas Fuel (KTG) with SilverBow, an oil and fuel exploration and manufacturing firm with stakes within the Eagle Ford Shale and Austin Chalk in Texas.
On April 16 Kimmeridge introduced it had withdrawn the merger proposal, which might have created “a preeminent pure-play Eagle Ford shale operator with an estimated enterprise worth of roughly $3.6 billion”, as acknowledged by Kimmeridge. The proposal had an fairness funding of $500 million from Kimmeridge.
On Could 2 Kimmeridge mentioned in a press launch, “SilverBow has pursued a failed M&A [mergers and acquisitions] technique that has put its stability sheet in danger – including debt and minimal quantity commitments that now characterize over 96 p.c of the Firm’s enterprise worth – whereas constantly destroying shareholder worth”.
Kimmeridge mentioned SilverBow has underperformed in comparison with its friends within the XOP trade, staying within the backside 10 p.c by way of market capitalization even after eight acquisitions. “SilverBow’s TSR [total shareholder return] has underperformed the XOP following all 8 of their acquisitions, notably -45 p.c since buying property from Teal (October 2021); -32 p.c since buying Sundance Vitality and Sandpoint Assets (April 2022); -24 p.c since saying its self-proclaimed ‘transformational’ acquisition of Chesapeake’s South Texas asset (August 2023)”, Kimmeridge acknowledged.
“The dearth of M&A expertise on SilverBow’s Board was most not too long ago on show with its failed evaluation of Kimmeridge’s proposal to mix SilverBow with Kimmeridge Texas Fuel”, Kimmeridge added.
“To advance the most effective pursuits of all SilverBow shareholders and problem the present Board’s establishment mindset, Kimmeridge has nominated three highly-qualified, unbiased director candidates – Carrie Fox, Douglas Brooks, and Katherine Minyard – for election on the 2024 annual assembly”, Kimmeridge mentioned.
In response SilverBow on Monday penned a letter to shareholders telling them Kimmeridge “continues its self-serving quest to take management of SilverBow and pressure a dilutive, value-destructive mixture with Kimmeridge Texas Fuel”.
SilverBow mentioned the proposal to merge with Kimmeridge Texas Fuel sought to “bail out” the latter. “Kimmeridge’s proposal to mix KTG with SilverBow undervalued SilverBow whereas considerably overvaluing its personal KTG property, and relied on a high-risk wager on a near-term return to costly fuel in a interval of historic low fuel costs”.
Defending its enlargement technique, SilverBow highlighted within the letter, shared on its web site, “SilverBow’s EBITDA [earnings before income tax, depreciation and amortization] margin is 12 p.c greater than friends”.
“This can be a results of working bills which might be greater than 40 p.c decrease than friends and money G&A [general and administrative costs] that’s greater than 70 p.c decrease than friends”.
For the primary quarter of 2024, SilverBow logged $24.07 in EBITDA margin per boe. Quarterly capital bills totaled $109.5 million.
SilverBow additionally highlighted it now has a leverage of 1.35x. “Since late 2023, on the closing of our South Texas acquisition, we’ve decreased leverage and doubled liquidity”, it wrote.
On inventory efficiency, the letter claimed, “SilverBow has delivered 484 p.c in complete shareholder returns since 2021, considerably outperforming the XOP’s 180 p.c”.
SilverBow insisted its M&A document reveals a profitable enlargement with the eight acquisition transactions having resulted in a 75 p.c share within the firm’s proved developed reserves as of yearend 2023.
Calling on shareholders to again its current management, SilverBow added, “With monitor data of monetary, operational and M&A experience, our administrators have led in depth careers as prime executives at blue-chip, large- and mega-cap vitality corporations. SilverBow’s Board has a median tenure of over 30 years within the oil and fuel trade and a median of over 35 complete years {of professional} expertise.
“Collectively, our administrators additionally convey deep M&A expertise at SilverBow and elsewhere, having executed over 250 offers valued at greater than $270 billion within the mixture. All 9 of SilverBow’s administrators have served at C-suite or senior govt ranges at E&P [exploration and production] or oilfield providers corporations, together with 5 as CEO, three as COO, 4 as CFO, and one as chief variety and inclusion officer. Moreover, all 9 have had board expertise at different public corporations, together with, however not restricted to, at E&P, oilfield providers or midstream corporations”.
From SilverBow’s board, up for election are Charles W. Wampler, an ex-chief govt at Useful resource Rock Exploration II; Gabriel L. Ellisor, a former chief monetary officer at Three Rivers Working Co.; Kathleen McAllister, a former chief govt of Transocean Companions LLC.
“Against this, Kimmeridge’s nominees are self-interested and conflicted, with shut ties to or historical past with Kimmeridge, and lack the blue-chip trade expertise of SilverBow’s nominees”, SilverBow claimed. “In truth, Kimmeridge’s nominees have considerably much less expertise, on common, than SilverBow’s, and one has no E&P expertise in any respect”.
To contact the writer, e-mail jov.onsat@rigzone.com