| Item 1.01 | Entry into a Material Definitive Agreement |
On August 11, 2023, SilverBow Resources, Inc. (the “Company”) and its operating subsidiary, SilverBow Resources Operating, LLC (“SilverBow Operating” and, together with the Company, the “SilverBow Parties”), entered into a purchase and sale agreement (the “Purchase Agreement”) with Chesapeake Exploration, L.L.C., Chesapeake Operating, L.L.C., Chesapeake Energy Marketing, L.L.C. and Chesapeake Royalty, L.L.C. (the “Chesapeake Sellers”), pursuant to which SilverBow Operating will acquire Chesapeake Energy Corporation’s oil and gas assets in South Texas (the “Chesapeake South Texas Assets”) for a purchase price of $700 million, comprised of a $650 million upfront cash payment due at closing and an additional $50 million deferred cash payment due on the first anniversary of the closing, subject to customary adjustments (the “Chesapeake Transaction”). The Chesapeake Sellers may also receive up to $50 million in additional contingent cash consideration based on future commodity prices.
The Purchase Agreement contains certain termination rights, including, but not limited to, each party’s right to terminate the Purchase Agreement in the event a material breach by the other party has occurred and is not waived on or before September 25, 2023, and in any event if the Chesapeake Transaction has not been consummated on or before November 24, 2023; provided that such date may be automatically extended for an additional 15 days in the event certain approvals and consents have not been obtained by such date.
The Chesapeake Transaction has an effective date of February 1, 2023, and is expected to close by year-end 2023, subject to satisfaction or waiver of certain customary closing conditions, including the accuracy of the representations and warranties of each party, compliance by each party in all material respects with its covenants and the satisfaction of certain consent requirements. The Chesapeake Transaction is expected to be funded with cash on hand, borrowings under the Company’s First Amended and Restated Senior Secured Revolving Credit Agreement, dated as of April 19, 2017, and amended as of June 22, 2022 (the “Credit Facility”), among the Company, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent for the lenders, and the Company’s amended second lien notes (“Second Lien Notes”) led by EIG. In conjunction with the Chesapeake Transaction, the Company has secured $425 million of incremental commitments under its Credit Facility from existing and new lenders, which, subject to the closing of the Chesapeake Transaction, will increase lender commitments under the Credit Facility to $1.2 billion, and the Second Lien Notes will be upsized by $350 million, which, subject to the closing of the Chesapeake Transaction, will increase lender commitments under the Second Lien Notes to $500 million and extend the maturity date for the Second Lien Notes to December 15, 2028.
The foregoing descriptions of the Purchase Agreement and the Chesapeake Transaction do not purport to be complete and are subject to and qualified in their entirety by reference to the copy of the Purchase Agreement, which is attached hereto as Exhibit 10.1.
| Item 7.01. | Regulation FD Disclosure |
On August 14, 2023, the Company issued a press release regarding the Chesapeake Transaction. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Also on August 14, 2023, the Company posted a corporate presentation on the Chesapeake Transaction to its website at www.sbow.com, which the Company may use from time to time in communications or conferences. A copy of the corporate presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information furnished under this Item 7.01, including Exhibits 99.1 and 99.2, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or as otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
