SilverBow Resources investor calls for energy producer's sale

Pva Tepla AG

14/06/2023 11:00

By David French
       June 14 (Reuters) - One of SilverBow Resources Inc's
 SBOW.N  largest shareholders called on the U.S. oil and gas
producer on Wednesday to drop its anti-takeover defenses and
explore a sale, according to a letter reviewed by Reuters.
    Hedge fund Riposte Capital wrote in the letter that
Houston-based SilverBow's valuation was weighed down by adoption
of a so-called poison pill to defend itself from a hostile bid
through dilution.
    "The current strategy determined by the board of directors
and management has siloed SilverBow and backed the company into
a corner," Riposte said in the letter.
    SilverBow did not respond to a comment request.
    SilverBow, which operates on around 180,000 net acres in
South Texas' Eagle Ford shale basin, adopted a poison pill last
September. It cited "significant accumulations" of the company's
stock without identifying any party as a threat. The poison pill
was extended on May 16 for another year.
    Riposte accused SilverBow of adopting the poison pill to
deter potential suitors willing to pay a good price. The letter
did not identify who those suitors might be.
    Run by Khaled Beydoun, Riposte said in the letter it holds a
7.5% stake in SilverBow, which would make it the company's
fourth-largest shareholder.
    Riposte said it believes the company could be worth between
$34 and $36 per share, based on comparisons to peers. SilverBow
shares closed on Tuesday at $26.63, giving the company a market
capitalization of about $600 million. It has lost 6% of its
value so far this year, slightly outperforming the 8% decline by
the S&P Energy index  .SPNY .
    New York-based Riposte also called on SilverBow to
prioritize shareholder returns over spending on new drilling. It
said this can be achieved by changing the structure of
management compensation, which currently incentivizes increased
oil and gas production, and laying down a rig to save cash.
    The letter is a rare example of shareholder activism from
Riposte, although it is not the first time it has publicly
voiced its displeasure at a company whose shares it owns: it
challenged Canadian cannabis producer HEXO Corp  HEXO.TO  in
2018, and German high-tech manufacturer PVA TePla  TPEG.DE  in
2020.

 (Reporting by David French in New York; Editing by David
Gregorio)
 ((davidj.french@thomsonreuters.com;))