SilverBow Resources acquires Chesapeake Energy’s South Texas Position

SilverBow Resources has entered into an agreement to acquire Chesapeake Energy’s oil and gas assets in South Texas for a purchase price of $700M, comprised of a $650M upfront cash payment due at closing and an additional $50M deferred cash payment due 12 months post close, subject to customary adjustments. Chesapeake may also receive up to $50M in additional contingent cash consideration based on future commodity prices. The Transaction is expected to close by year-end 2023. The transaction is expected to be funded with cash on hand, borrowings under the company’s First Amended and Restated Senior Secured Revolving Credit Agreement, and the company’s amended second lien notes led by EIG. In conjunction with the Chesapeake Transaction, the company has secured $425M of incremental commitments which will increase lender commitments under the Credit Facility to $1.2B, and the Second Lien Notes will be upsized by $350 M, which will increase lender commitments under the Second Lien Notes to $500M and extend the maturity date for the Second Lien Notes to December 15, 2028. The estimated impact to SilverBow from the Chesapeake Transaction increases expected 4Q23 net production to 87,000-99,000 Boe/d, ~50% oil/NGLs, adds critical scale with ~$825M-$925M of pro forma next 12 months EBITDA, free cash flow in 2024 expected to increase by more than 80%. Chesapeake expected production is ~31,000-33,000 Boe/d ~60% oil/NGLs for 4Q23. To protect the financial benefits of the Chesapeake Transaction, SilverBow plans to hedge a significant portion of the company’s expected volume for the next three years.