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SilvewBow Resources Inc. has closed the purchase of oil and gas assets in South Texas from Chesapeake Energy Corp.
The company said in a media release that the purchase had a price tag of $700 million, comprising $659 million in upfront cash paid at closing and an additional $50 million deferred cash payment due 12 months post-close, subject to customary adjustments.
The consideration for the purchase was funded with cash on hand, borrowings and proceeds from the sale of additional second-lien notes. Chesapeake may also receive up to $50 million in additional contingent cash consideration based on future commodity prices, SilverBow said.
“We are excited to close the Chesapeake Transaction, which materially increases our scale in South Texas and transforms SilverBow into the largest public pure-play Eagle Ford operator. Our differentiated growth and acquisition strategy has positioned us with a stronger balance sheet, a broader commodity mix and a portfolio of locations across a single, geographically advantaged basin. The acquired Chesapeake assets further enhance our optionality to continue allocating capital to our highest return projects and will immediately compete for capital”, said Sean Woolverton, SilverBow’s chief executive officer.
For the remainder of 2023, the company said there is no material change to its development plans as previously provided in early November. SilverBow expects to continue operating two drilling rigs across its acreage and does not anticipate any incremental capex on the acquired assets. The company said its full year 2023 free cash flow range of $40-$60 million represents a 67 percent increase at the midpoint from its prior range and includes one month of contribution from the acquired assets.
For 2024, SilverBow said it plans to operate three drilling rigs with one rig dedicated to the recently acquired assets. Oil production is expected to increase approximately 70 percent year-over-year and average 25,000 barrels per day (bpd). The company’s full year production mix is expected to be more than 40 percent oil/natural gas liquids.
“We plan to expand our capital program to develop the high return inventory acquired, with three rigs running across our portfolio in 2024. Our current expectation is to run two rigs on our liquids properties and one rig on our dry gas properties. As always, our development plan and capital allocation remain flexible based on prevailing commodity prices. Strong production growth is expected to generate significant free cash flow which will allow us to pay down debt, reduce leverage to 1.0x and below and stay opportunistic towards our strategic objectives”, Woolverton said.
To contact the author, email andreson.n.paul@gmail.com
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