425: WhiteHawk Energy Makes Public $4.00 Per Share All-Cash Offer for PHX Minerals, Citing Stockholder Value Destruction

WhiteHawk Energy reiterates its proposal to acquire PHX Minerals for $4.00 per share in cash, highlighting concerns over PHX's financial performance and lack of engagement.

Summary

• WhiteHawk Energy has publicly announced its proposal to acquire PHX Minerals for $4.00 per share in an all-cash transaction.
• The offer represents a 19% premium to PHX's 90-day volume-weighted average price and a 17% premium to its 30-day volume-weighted average price as of October 11, 2024.
• WhiteHawk owns approximately 2.5% of PHX's outstanding common stock.
• WhiteHawk criticizes PHX's management for excessive G&A expenses ($40.1 million since 2020), dilutive acquisitions, minimal dividends ($11.4 million since 2020), and stock price underperformance.
• WhiteHawk has been attempting to engage with PHX for 18 months, making multiple proposals, but PHX has been unwilling to engage in meaningful discussions.
• WhiteHawk is urging the PHX Board of Directors to engage with WhiteHawk to complete a transaction and is calling on fellow stockholders to demand that the PHX Board of Directors pursue the value creating opportunity described in this letter.

Sentiment

Score: 6

Explanation: The sentiment is mixed. WhiteHawk is positive about its offer and the potential for value creation, but negative about PHX's management and past performance. The overall tone is assertive and critical of PHX's leadership.

Positives

• The offer of $4.00 per share represents a premium to PHX's recent trading prices.
• WhiteHawk's ownership of 2.5% of PHX's stock aligns its interests with other stockholders.
• WhiteHawk has secured financing support for the all-cash transaction.

Negatives

• PHX's management has been unwilling to engage with WhiteHawk's proposals for the past 18 months.
• WhiteHawk criticizes PHX's management for excessive G&A expenses, dilutive acquisitions, and minimal dividends.
• PHX's stock price has underperformed its peers and the broader market since 2020.

Risks

• There is no guarantee that PHX will accept WhiteHawk's offer.
• The transaction is subject to negotiation and execution of definitive documentation.
• The transaction is subject to closing conditions, including any necessary stockholder approvals.
• Changes in natural gas prices could impact the attractiveness of the offer.

Future Outlook

WhiteHawk intends to continue pursuing a transaction with PHX and urges the PHX Board to engage in discussions.

Management Comments

• We are disappointed that PHX has been unwilling to engage with WhiteHawk over the past 18 months, which has forced us to make public this proposal, said Daniel C. Herz, WhiteHawks Chairman and Chief Executive Officer.
• We strongly believe that our proposal is in the best interest of all stockholders involved, and believe it is imperative to publicly illuminate the destruction of value, as compared to the opportunity for a sale at a significant premium.

Industry Context

The announcement reflects ongoing consolidation efforts within the natural gas mineral and royalty sector, with WhiteHawk seeking to expand its holdings in the Haynesville and Marcellus Shales.

Comparison to Industry Standards

• The document compares PHX's stock performance to its mineral peers (BSM, KRP, STR, VNOM) and gas-weighted E&P producers (AR, CHK, CNX, CRK, CTRA, EQT, GPOR, RRC, SWN).
• The document claims PHX's stock price has significantly lagged behind almost every sector of the market during this period, including its mineral peers, gas-weighted E&P companies, and the broader market.

Stakeholder Impact

• PHX stockholders could receive a premium for their shares if the transaction is completed.
• PHX employees may be affected by the potential acquisition.
• The acquisition could impact PHX's relationships with its customers and suppliers.

Next Steps

• WhiteHawk urges the PHX Board of Directors to engage with WhiteHawk to complete a transaction.
• WhiteHawk calls on all fellow stockholders to demand that the PHX Board of Directors pursue the value creating opportunity described in this letter.

Key Dates