Silver Run Takes Majority Stake in Oil Producer Centennial
Silver Run Acquisition Corp, run by energy industry veteran Mark Papa, said on Friday it had taken a controlling stake in oil producer Centennial Resource Development LLC, with plans to develop its acreage in the Permian basin of Texas.
The deal, which was first reported by Reuters on Tuesday, comes as private equity and other investors have begun to scoop up acreage across U.S. shale fields as crude prices climb off 2016 lows.
Shares of Silver Run jumped about 5 percent after the news on Tuesday. The stock gained further on Friday, adding another 5 percent to reach $11.10.
Energy-focused private equity firm Riverstone Holdings LLC, which is Silver Run's sponsor, took a controlling stake in Centennial earlier this month.
As part of the deal announced Friday, Riverstone will buy about $810 million of Silver Run shares, giving it approximately 51 percent control of Silver Run. Two other funds, Capital World Investors and Fidelity Management, will buy a combined $200 million stake in Silver Run.
Silver Run will use the proceeds to buy its controlling stake in Centennial. Once the deal is closed, Silver Run expects to have $100 million of cash-on-hand and no debt.
In filing to go public earlier this year, Silver Run had said that as part of any transaction it would engage in, Riverstone would be expected to take a large stake.
Papa, Silver Run's chief executive, will oversee development of Centennial's Texas acreage once the deal closes, which is expected by September. Silver Run will also change its name to Centennial and its stock ticker to "CDEV."
By putting Centennial under Papa's leadership, Riverstone is effectively betting that Centennial's acreage can be better developed with the veteran executive in charge, and fetch a higher valuation in the future than now in a public offering, a source familiar with the matter had said ahead of the deal's confirmation on Friday.
Papa previously led EOG Resources Inc, a well-respected U.S. shale oil producer.
"I look forward to replicating the culture and philosophy that made EOG Resources such a success during my time there and using the Centennial assets as a platform to build something truly special," Papa said in a statement.
Reporting by Ernest Scheyder
