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.