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Silver Run Acquisition Corporation II-IPO

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Will The Sequel Be The Equal


As a long time Wall Street investment banker, I have learned there is a message in every financial offering be it debt or equity. Each offering is a measure of the public appetite for some specific business or a new twist to an existing business. In the prospectus there are facts, future looking statements, assets, balance sheets even income statements that give some perspective on the company.

And then there is Silver Run Acquisition Corp. Management of Silver Run is seeking to raise $460,000,000. Here is a direct quote from the prospectus filed just a few days ago on March 2, 2017 by underwriters CitiGroup, Deutsche Bank and Credit Suisse.

“Silver Run Acquisition Corporation II is a newly organized blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. We have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to focus our search for a target business in the energy industry.”

And then there is this section on how Silver Run Acquisition Corp II is doing these days:

Results of Operations and Known Trends or Future Events

“We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary to prepare for this offering.”

Honestly folks, would you sign a check to buy a unit or two of Silver Run? Well you would if you had invested in Silver Run Acquisition Corp I in February of last year on the initial public offering. Last years offering was priced at $10 and is currently trading over $17 having reached an all time high of $19.16. Not bad at all.

The prospectus back then didn’t look or read much different than Silver Run II. Even the $450,000,000 offering size was about the same.

Lots of Happy Investors

Last years offering turned out to be particularly propitious coming very near the $26 per barrel low in oil prices. The price of energy assets dropped at just as fast in the face of fading cash flow and looming debt burdens. It may have been bad times for the energy business, but it was party time for Silver Run Acquisition Corp.

And with the performance of Silver Run Acquisition Corp I so much better than the average stock in or outside the energy area investor appetites are probably ready for the sequel with Silver Run Acquisition Corp II.

Proven Leadership Really Helps

Silver Run’s chief executive officer is Mark Papa, a guy who has been in the oil and gas industry over 45 years. Fifteen of those years he was CEO of EOG Resources Inc. a one-time division of Enron. The company credits Mark with transforming EOG into one of America’s biggest oil companies. This may sound like so much oil industry bravado considering we are talking about the infamous Enron Corp. One thing is certain, Mark’s timing with Silver Run Acquisition Corp I was flawless. Now, can he repeat his performance of last year? Something tells you that for all the legal denials in the prospectus, Mark has plenty of ideas on his mind how to put almost a half billion dollars to work.

Oil prices may have nearly doubled from their 2016 lows around $26 per barrel but they are still miles away from the 2015 levels above $100. This means there are still deals to be done.

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