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Crescent Energy to Acquire SilverBow in US$2.1 Billion Oil and Gas Deal
The deal is the second major piece of news from Crescent Point this month and will position it as the second biggest operator in the Eagle Ford shale.
Crescent Energy (TSX:CPG,NYSE:CPG) is set to acquire SilverBow Resources (NYSE:SBOW) in a deal valued at US$2.1 billion, positioning Crescent as the second largest operator in the Eagle Ford shale.
Under a definitive agreement announced on Thursday (May 16), SilverBow shareholders will receive 3.125 shares of Crescent Class A common stock for each share of SilverBow common stock they own, with an option to receive cash at a value of US$38 per share, subject to a cash consideration cap of US$400 million.
John Goff, chairman of the board at Crescent, said the deal will place the business in a more favorable position.
“This is a compelling transaction for shareholders of both companies, creating a premier growth through acquisition platform," he explained. “As Chairman and a major long-term shareholder, it has been exciting to watch this business execute on the strategy management laid out from the very beginning. This combination further positions Crescent as a leading growth business, and we look forward to welcoming the SilverBow team as we continue to build this company."
The move aligns with Crescent's long-term strategy of growth through acquisition, focusing on deriving a balanced portfolio of high-quality and long-life assets leading to augmented cash flow. The merger is expected to yield annual synergies of US$65 million to US$100 million through cost savings and operational efficiencies.
According to the company, these efficiencies will stem from immediate cost-of-capital savings and enhanced operating capabilities due to the complementary nature of the companies' assets.
This acquisition follows the announcement that Crescent will be selling particular non-core assets in Saskatchewan to Saturn Oil & Gas (TSX:SOIL,OTCQX:OILSF) for C$600 million. During the first quarter of the year, Crescent Point also sold its Swan Hills and Turner Valley assets for C$140 million.
The SilverBow purchase is designed to create a leading mid-cap exploration and production (E&P) company that is well positioned for sustainable value creation with the stability characteristic of larger operators.
Post-merger, Crescent’s board will expand to 11 members, incorporating two SilverBow directors. Crescent will remain headquartered in Houston, with Goff being non-executive chairman and David Rockecharlie continuing as CEO.
The acquisition is part of a broader trend of heightened M&A activity in the oil and gas industry.
In 2023, E&P companies increased their spending on mergers and acquisitions to US$234 billion, the highest in real 2023 dollars since 2012. This surge marks a return to the previous trend of consolidation among US oil and gas companies, following a decline in transactions during the significant oil market volatility of 2020 and 2022.
The M&A spending encompasses both corporate mergers and asset acquisitions. Notably, corporate M&A accounted for 82 percent of the total spending, driven by high-profile deals such as ExxonMobil’s (NYSE:XOM) acquisition of Pioneer Natural Resources for US$64.5 billion and Chevron’s (NYSE:CVX) US$60 billion acquisition of Hess.
According to the US Energy Information Administration, these deals are the largest by value since Occidental Petroleum’s (NYSE:OXY) US$55 billion acquisition of Anadarko Petroleum in 2019.
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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.
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Giann Liguid is a graduate of Ateneo De Manila University with an AB in Interdisciplinary Studies. With a diverse writing background, Giann has written content for the security, food and business industries. He also has expertise in both the public and private sectors, having worked in the government specializing in local government units and administrative dynamics. When he is not chasing the next market headline, Giann can most likely be found thrift shopping for his dogs.
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