Bonanza Creek Energy and Extraction Oil & Gas set to form Civitas Resources in $2.6bn deal

In a major development for the Colorado oil and gas sector, Bonanza Creek Energy and Extraction Oil & Gas have announced their merger, creating a new energy powerhouse in the Denver-Julesburg (DJ) Basin under the name Civitas Resources. With an enterprise value of approximately $2.6 billion, the deal combines the strengths of both companies, positioning the newly formed entity as one of the leading oil and gas producers in the region. This strategic merger is poised to reshape the industry, particularly in terms of sustainable energy practices, cost efficiency, and operational excellence.

The Creation of Civitas Resources: What It Means for the DJ Basin

Civitas Resources, the result of the merger between Bonanza Creek Energy and Extraction Oil & Gas, will oversee a combined land base of around 425,000 net acres, primarily located in the DJ Basin. This vast acreage will enable the company to produce approximately 117,000 barrels of oil equivalent per day. The DJ Basin, known for its low operating costs and well-established infrastructure, is one of the most productive oil and gas regions in the United States. This merger allows both companies to leverage the basin’s rich resources and maximize the economic potential of their operations.

The Denver-Julesburg Basin has long been a hub for oil and gas production, offering a wealth of advantages, including access to diverse producing horizons, significant takeaway capacity, and cost-effective operations. By joining forces, Bonanza Creek Energy and Extraction Oil & Gas are poised to enhance their competitive edge and increase their market share in this highly profitable region.

Why Did Bonanza Creek Energy and Extraction Oil & Gas Merge?

For both Bonanza Creek Energy and Extraction Oil & Gas, the merger represents a critical opportunity to strengthen their position in the industry. According to Bonanza Creek’s President and CEO, Eric Greager, the key to success in the oil and gas sector is disciplined capital deployment, operational efficiency, and a strong focus on shareholder value. He believes that the combination of Bonanza Creek and Extraction Oil & Gas will enable Civitas Resources to meet these objectives more effectively. Greager further stated that both companies have shared values, including a commitment to responsible energy production and a focus on community engagement, making them ideal partners for this transformative deal.

The leadership of both companies sees the merger as a way to ensure long-term success in the industry, particularly as energy markets continue to evolve and demand for sustainable practices increases. As a result, Civitas Resources is positioned to become a key player in the oil and gas sector, with an emphasis on profitability, sustainability, and operational excellence.

A New Era of Sustainability in the Oil and Gas Industry

One of the most notable aspects of the merger is the shared commitment of both companies to sustainability. Tom Tyree, CEO of Extraction Oil & Gas, emphasized that the combined entity, Civitas Resources, will become Colorado’s first net-zero oil and gas producer. This ambitious goal will be achieved by reducing operational emissions and investing in certified emissions offsets over the long term. The oil and gas industry has faced increasing pressure to adopt greener practices, and Civitas Resources aims to be at the forefront of this shift.

By focusing on operational emissions reductions and sustainable practices, Civitas Resources intends to differentiate itself from other producers in the region. This commitment to sustainability aligns with broader industry trends and reflects the growing demand for environmentally responsible energy solutions. As the energy landscape shifts toward greener alternatives, companies like Civitas Resources are poised to lead the charge in transforming the oil and gas sector.

The Deal Structure: What It Means for Shareholders

The terms of the deal stipulate that Extraction Oil & Gas shareholders will exchange each of their shares for 1.1711 shares of Bonanza Creek’s common stock. Upon closing, both Bonanza Creek and Extraction shareholders will hold an equal 50% stake in Civitas Resources. The transaction is subject to approval by shareholders of both companies and other customary closing conditions. If all goes according to plan, the merger is expected to be finalized in the third quarter of 2021.

This all-stock deal ensures that no cash will be exchanged, and both companies’ shareholders will benefit from the synergies created by the merger. The combined company will have a stronger balance sheet, greater scale, and the ability to capitalize on the growth opportunities within the DJ Basin. As a result, stakeholders from both companies stand to benefit from the increased value generated by the merger.

Looking Ahead: What’s Next for Civitas Resources?

As Civitas Resources prepares to emerge as a dominant force in the DJ Basin, the company will focus on maximizing its resource base and operational efficiency. With a leadership team committed to disciplined capital deployment and a focus on sustainable practices, Civitas is poised to deliver value for its stakeholders. The company’s operations in the DJ Basin will continue to be at the core of its strategy, with a focus on optimizing its production and reducing costs wherever possible.

At the same time, Civitas Resources is committed to making a positive impact on the communities in which it operates. Both Bonanza Creek Energy and Extraction Oil & Gas have a history of community involvement, and this will remain a priority for the merged entity. As the energy landscape continues to evolve, Civitas will work to ensure that it remains at the forefront of innovation, sustainability, and responsible energy production.

Civitas Resources Takes the Lead in the DJ Basin

The merger of Bonanza Creek Energy and Extraction Oil & Gas into Civitas Resources marks a new chapter in the history of Colorado’s oil and gas industry. With an impressive portfolio of assets in the DJ Basin and a strong commitment to sustainability, Civitas Resources is well-positioned to become a leader in the energy sector. As the company moves forward, it will focus on maximizing operational efficiency, reducing emissions, and delivering value for all stakeholders. This merger is not only a major milestone for the companies involved but also a significant step toward a more sustainable future for the oil and gas industry as a whole.