Top shareholders push for board overhaul at energy producer SilverBow (updated)

SilverBow Resources

30/11/2023 17:40

(Recasts and adds Kimmeridge statement, adds share reaction)
    By David French
       Nov 30 (Reuters) - Two of SilverBow Resources Inc's
 SBOW.N  largest investors are pushing the U.S. oil and gas
producer to revamp its board to address governance concerns and
boost its lagging performance, according to statements on
Thursday.
    Hedge fund Riposte Capital, which currently holds a 6.7%
stake in SilverBow, in a letter to the company urged SilverBow
to appoint three new directors to its board, months after
Reuters reported the investor's attempts to push the shale
producer to drop anti-takeover defences and explore a sale. 
    In its latest letter, the fourth-largest stockholder called
on the company to appoint new board members at the shareholder
meeting due next year, having failed to act on its earlier
demands and, instead, pursued a strategy that resulted in a
further underperformance against rivals.
    Kimmeridge Energy Management, the largest shareholder in
SilverBow with a 12.9% stake, said in a subsequent statement to
Reuters it "would be supportive of moves to improve
accountability, alignment and performance" and that it was "hard
to argue" with the points made by Riposte.
    SilverBow did not respond to a request for comment.
    SilverBow's shares rose as much as 5% in early trading, on
the back of Riposte's letter, before giving up all its gains as
crude prices slumped on news of an agreement on production cuts
by the OPEC+ producers.
    The company has a market capitalization of about $800
million. Its shares have gained 11% this year, outperforming the
5.7% decline by the S&P Energy index  .SPNY , which is made up
of the largest energy companies.
    New York-based Riposte argues that, when compared with
smaller peers, SilverBow has lagged on an earnings multiple
basis this year, and may do so again in 2024 based on latest
forecasts.  
    Riposte, run by Khaled Beydoun, said the company's deal to
acquire assets for $700 million from Chesapeake Energy  CHK.O 
had also diluted existing shareholders as it issued new stock to
partially fund the deal. 
    The hedge fund's dissent at SilverBow is a rare example of
shareholder activism from Riposte, which has only publicly
voiced its displeasure at a company whose shares it has owned on
a couple of occasions in recent years.
    SilverBow's board is comprised of nine members, most of whom
are independent directors. Strategic Value Partners had
previously held the right to nominate two directors but one of
its nominees dropped off the board on Monday, after the
investment firm sold part of its stake. 
    SilverBow operates on around 180,000 net acres in South
Texas' Eagle Ford shale basin. The company's deal for
Chesapeake's assets, which is due to close by the end of the
year, will boost its operations by another 42,000 net acres.

 (Reporting by David French in New York; Editing by Anirban Sen,
Jacqueline Wong and Susan Fenton)
 ((davidj.french@thomsonreuters.com;))