SilverBow's (SBOW) South Texas Asset Buy Streak Continues
Houston, TX-based upstream energy company SilverBow Resources SBOW, has agreed to buy Chesapeake Energy Corporation’s CHK remaining assets in the Eagle Ford Shale for $700 million. The deal, which is strategically aligned with SilverBow's long-term goals, is set to fortify the company’s presence in South Texas and bolster its foothold in the prolific shale play.
Strengthening Asset Base, Operations
The acquisition is seen as an important development for SBOW that enhances the company's operational reach and underscores its commitment to extracting value from strategic resources. The transaction — likely to close by this year-end — encompasses approximately 42,000 acres in Dimmit and Webb counties, adding to SilverBow’s already robust inventory.
The addition of these prime acreages is anticipated to bring about 300 high-confidence drilling locations into SilverBow's portfolio, marking a transformational step toward becoming a major player in the Eagle Ford region. It will also help to diversify SilverBow's commodity exposure while maintaining a robust financial standing.
Deal Terms & Funding
The purchase price of $700 million is structured as a $650 million upfront cash payment plus a $50 million deferred cash payment due 12 months after the deal concludes. SilverBow's financing plan encompasses a combination of cash reserves, borrowings under the company's credit agreements, and incremental commitments from lenders. In fact, SBOW has secured an extra $425 million under its credit facility to fund the deal.
SBOW’s Acquisition Spree
The pure play Eagle Ford operator has a successful track record of delivering growth through acquisitions, and the latest move to acquire Chesapeake Energy’s assets only builds upon this strategy. SBOW has embarked on a series of buyouts, including the noteworthy purchase of Sundance Energy last year. The CHK deal is SilverBow's eighth in the past two years and highlights the company’s goal to capitalize on attractive opportunities and expand its portfolio with carefully selected assets.
What’s in It for Chesapeake?
As far as Chesapeake Energy is concerned, it is finally leaving the Eagle Ford Shale following a spate of divestitures. The sale to SilverBow was preceded by asset sales to WildFire Energy and Ineos Energy earlier in the year. These strategic moves are a reflection of Chesapeake's focused approach to maximizing returns and optimizing its portfolio.
Zacks Rank & Stock Picks
SilverBow Resources carries a Zacks Rank #3 (Hold) at present. Meanwhile, investors interested in the energy sector might look at operators like Solaris Oilfield Infrastructure SOI and Helix Energy Solutions Group HLX. Both these companies have a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Solaris Oilfield Infrastructure: SOI beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters at an average of 18.8%.
SOI is valued at around $497 million. Solaris Oilfield Infrastructure has seen its shares move up 3.4% in a year.
Helix Energy Solutions Group: Over the past 30 days, Helix Energy Solutions Group saw the Zacks Consensus Estimate for 2023 move up 4.3%. The 2023 Zacks Consensus Estimate HLX indicates 200% year-over-year earnings per share growth.
Helix Energy Solutions Group is valued at around $1.4 billion. HLX has seen its shares surge 134.5% in a year.
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Chesapeake Energy Corporation (CHK) : Free Stock Analysis Report
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Solaris Oilfield Infrastructure, Inc. (SOI) : Free Stock Analysis Report
