Civitas Resources to acquire Vencer Energy’s oil assets in $2.1bn deal

Civitas Resources is set to expand its footprint in the Midland Basin, US, with the acquisition of Vencer Energy’s oil-producing assets in a deal valued at approximately $2.1 billion. This strategic move grants Civitas Resources access to an estimated 400 gross development locations, primarily located in the Spraberry and Wolfcamp formations in west Texas.

The deal will significantly bolster Civitas Resources’ presence in the Midland Basin, adding approximately 44,000 net acres and boosting current production to around 62,000 barrels of oil equivalent per day (boe/d), with nearly half of that being oil. Post-transaction, Civitas Resources anticipates an estimated 2024 production of around 170 million boe/d in the Permian Basin, with approximately 50% attributed to oil.

For 2024, the company’s overall production is projected to range between 325 million boe/d and 345 million boe/d, with total capital expenditures estimated at $1.95 billion to $2.25 billion.

A remarkable aspect of this deal is that nearly 40% of the new locations acquired are expected to yield a projected internal rate of return (IRR) of over 40% at $70 per barrel WTI.

Civitas Resources will substantially increase its high-quality oil development locations in the Permian Basin to over 1,200 upon the deal’s completion.

Chris Doyle, President, and CEO of Civitas Resources, expressed his enthusiasm, stating, “This was a unique opportunity to capture high-quality oil assets at a very attractive price. In recent months, we have created a quality, scaled position in the heart of the Permian Basin. We continue to advance our strategic pillars by adding premium inventory, increasing Free Cash Flow, and delivering the industry’s best cash returns to shareholders.”

He further added, “Upon closing, our portfolio will be balanced between the Permian and DJ basins, which reduces operational risk and makes us a stronger and more sustainable enterprise.”

The consideration for the deal includes nearly 7.3 million shares of common stock to be issued to Vencer Energy, along with a cash component of $1.55 billion.

Vencer Energy, established in 2020 by Vitol, acquired its foundational asset base of 44,000 net acres in the Midland Basin a year later. Since then, the company’s production across its acreage has grown from nearly 40 million boe/d to 60 million boe/d.

Ben Marshall, Head of Vitol Americas, commented on the deal, saying, “We are pleased to announce this deal with Civitas Resources and believe the Vencer assets will be an exciting complement to their growing position in the Permian. We also want to thank Don Dotson, Vencer’s CEO, and the rest of the Vencer Energy team for their hard work and tremendous results over the past 3.5 years.”

Marshall emphasized Vitol’s commitment to the upstream sector, expressing an ongoing interest in expanding their portfolio. The deal is expected to close in January 2024.