Civitas Resources sets foot in Permian Basin with $4.7bn twin acquisition

In a massive $4.7 billion agreement, Denver-based energy company Civitas Resources expands its oil-producing assets into the Permian Basin in the US.

The purchase involves acquiring assets in the Midland and Delaware Basins from affiliates of Hibernia Energy III and Tap Rock Resources, both portfolio companies under NGP Energy Capital Management.

The deals, set to close in Q3 2023, provide Civitas Resources with an anticipated 68,000 net acres in the Basins, 90% of which is held-by-production. The acquisition also bolsters the company’s proved reserves with around 335 million barrels of oil equivalent (mmboe) as of 2022’s end.

These transactions denote Civitas Resources’ initial entry into the lucrative Permian Basin, a significant step from its established operations in the Denver-Julesburg Basin (DJ Basin) in Colorado. Civitas Resources was formed in 2021 through the merger of Bonanza Creek Energy and rival Colorado-based oil and gas company Extraction Oil & Gas.

Chris Doyle — Civitas Resources President and CEO said: “These accretive and transformative transactions will immediately create a stronger, more balanced and sustainable Civitas.

“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. We will soon have nearly a decade of price-resilient, high-return drilling inventory.

“Our strong capital structure allowed us to capture these transformational assets, and, importantly, behind the strength of the pro forma business, we have a clear path to reduce leverage and maintain long-term balance sheet strength.”

Civitas Resources has secured a portion of Tap Rock Resources’ Delaware Basin assets for $2.45 billion. This consideration consists of $1.5 billion in cash and approximately 13.5 million shares in Civitas Resources.

However, the Olympus development area remains exclusive, with Tap Rock Resources retaining its ownership. Hibernia Energy III has consented to offload its Midland Basin assets to Civitas Resources in an all-cash agreement amounting to $2.25 billion.

The added assets are projected to augment Civitas Resources’ current production by a substantial 60%, adding nearly 100 thousand barrels of oil equivalent per day (mboe/d), where 54% is oil.

These assets are expected to maintain an average yield of approximately 105 mboe/d from the deal’s closure until the end of 2023. As the company steps into a new territory, these transactions subject to standard terms and conditions affirm Civitas Resources’ commitment to broadening its oil, natural gas, and natural gas liquids production portfolio.