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SilverBow's (SBOW) Buyout Proposal Withdrawn by Kimmeridge

In a recent development, Kimmeridge Energy Management has decided to withdraw its $2.1 billion buyout offer for SilverBow Resources Inc. SBOW. The former had proposed a potential merger between its gas-producing assets, Kimmeridge Texas Gas (“KTG”) and SilverBow. Later, SilverBow rejected the proposal citing undervaluation concerns. SBOW had stated that it is open to engaging in transactions with Kimmeridge at an appropriate valuation.

Kimmeridge has blamed SilverBow’s lack of willingness to engage in discussions as the reason behind the withdrawal. The company had previously made a statement, stating that it had offered a financed, premium proposal to merge KTG and SilverBow, which would have created a leading pure-play Eagle Ford shale operator. Kimmeridge also highlighted that the combined firm’s enterprise value would be approximately $3.6 billion.

SilverBow’s board allegedly failed to provide any clear information on the relative valuation of the company. Also, it did not provide the terms under which it would be willing to engage in a transaction.

SilverBow has been accused of being unwilling to engage in any merger discussions, where it would be the smaller party. According to Kimmeridge, the board and management are rather focused on safeguarding their positions and compensation.

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Consequently, Kimmeridge does not see any possibility of finalizing the deal by Apr 26, 2024. Following these developments, Kimmeridge withdrew its merger proposal and will now redirect its efforts toward providing solutions for governance issues within SilverBow.

Furthermore, the asset management group encourages SilverBow shareholders to vote for three independent, highly-qualified nominees to the board in the upcoming SilverBow annual meeting of shareholders on May 21. Kimmeridge has emphasized that its nominees will be committed to impartially evaluating strategies for value creation.

Previously, in a letter to its shareholders, the upstream energy firm had urged its shareholders to vote against candidates nominated by Kimmeridge.

Two of SilverBow’s largest shareholders, Kimmeridge, followed by Riposte Capital, have been pushing the upstream energy firm to restructure its board or consider a sale.

Zacks Rank and Key Picks

Currently, SBOW holds a Zacks Rank #4 (Sell).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, SM Energy SM and Hess Midstream LP HESM. Archrock and SM Energy presently sport a Zacks Rank #1 (Strong Buy) each, while Hess Midstream carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior- year reported figure, signaling a bright production outlook.

Hess Midstream LP owns, operates, develops and acquires a wide range of midstream assets, providing services to Hess Corporation and other third-party customers. The partnership has a stable fee-based revenue model secured via long-term commercial contracts. Since Hess Midstream operates through 100% fee-based contracts, it is exposed to minimal commodity price risks.

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Archrock, Inc. (AROC) : Free Stock Analysis Report

Hess Midstream Partners LP (HESM) : Free Stock Analysis Report

SilverBow Resources (SBOW) : Free Stock Analysis Report

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