Denver's Civitas Resources strikes $4.7B deal to move into Permian
Denver-based oil and gas company Civitas Resources has struck two deals totaling nearly $5 billion to move into the Permian Basin, the country’s leading shale-oil play.
Civitas said Tuesday that it has signed agreements for a total of $4.7 billion with affiliates of Hibernia Energy and Tap Rock Resources, companies managed by the private equity firm NGP Energy Capital Management. Civitas called the deal transformative, giving it “a stronger, more balanced and sustainable enterprise.”
Civitas, which currently operates only in the Denver-Julesburg Basin of northern Colorado, said in a statement that the new assets in West Texas and eastern New Mexico, will boost its production by 60%.
“By acquiring attractively priced, scaled assets in the heart of the Permian Basin, we advance our strategic pillars through increased free cash flow and enhanced shareholder returns,” Chris Doyle, Civitas president and CEO, said in a statement.
The acquisition “in the heart of the Permian Basin” will provide nearly a decade of high-return drilling inventory, Doyle said.
With a market capitalization a bit over $5 billion, Civitas is pursuing “one of the more ambitious deal-driven expansions in the recent market,” Andrew Dittmar, director at Enverus Intelligence Research, said in an email.
“This looks mostly like a play for additional scale for Civitas and expands the company’s operations beyond the DJ Basin into both sub-basins of the Permian,” Dittmar said. “While Civitas’ remaining DJ drilling locations are economic at current prices, future expansion opportunities in the play look limited with few remaining private companies to roll up.”
The deals, expected to close in the third quarter, was criticized by Shift Action for Pension Wealth and Planet Health, a Canadian organization that focuses on pension funds and climate change. The group noted that the Canada Pension Plan Investment Board is Civitas’ largest shareholder and said Civitas’ plan to increase its production runs counter to the board’s pledge to achieve net-zero greenhouse-gas emissions by 2050.
“The CPPIB is risking our national retirement fund on stranded assets and investing in a future of ever-worsening climate disaster,” Patrick DeRochie, senior manager of Shift, said in s statement.
The pension board declined to comment on Shift Action’s statement. Civitas didn’t return a request for comment.
Civitas’ deal with Tap Rock includes a portion of the company’s assets in the Delaware Basin of the Permian. Civitas has agreed to pay Tap Rock $2.45 billion, which includes $1.5 billion in cash and approximately 13.5 million shares of Civitas common stock valued at approximately $950 million.
The purchase covers about 30,000 net acres, primarily in Eddy and Lea counties in New Mexico, and an inventory of approximately 350 high-quality locations, Civitas said.
Civitas has also agreed to buy Hibernia’s assets in the Midland Basin of the Permian for $2.25 billion in cash. The company said the assets include approximately 38,000 net acres in Upton and Reagan counties in Texas and an inventory of about 450 high-quality locations.
Civitas plans to pay for the transactions with approximately $2.7 billion of unsecured senior debt; about 13.5 million shares of its common stock valued at $950 million; about $600 million in borrowings under the company’s undrawn credit facility; and approximately $400 million of cash-on-hand.
Bank of America and JP Morgan are also providing Civitas with $3.5 billion of committed financing for the transaction.
Civitas’ operations in the Denver-Julesburg Basin covers roughly 500,000 acres, largely in Weld, Adams and Arapahoe counties. The company’s production is 160,000 barrels of oil equivalent per day, according to its website.
Civitas formed in May 2021 when Denver-based Bonanza Creek Energy and Extraction Oil and Gas Inc. merged. A month later, the company acquired Denver-based Crestone Peak Resources to further consolidate operations along the Front Range.
Source: The Denver Post
