Denver’s energy powerhouse, Civitas Resources Inc., is expanding its upstream footprint in the Permian Basin. The company has inked a $2.1 billion deal with Vencer Energy LLC, a subsidiary of Vitol Inc. This acquisition bolsters Civitas’ position with an additional 44,000 net acres located in the Midland Basin, West Texas.
The newly acquired assets currently pump out a remarkable 62,000 boe/d. Notably, natural gas constitutes roughly half of this output. The deal further introduces around 400 gross development locales, predominantly in the Spraberry and Wolfcamp geological formations.
Civitas CEO, Chris Doyle, spoke on the acquisition, “This lucrative opportunity allowed us to acquire prime oil assets at an exceptionally appealing rate.” He went on to underscore Civitas’ strategic endeavors in the recent past, emphasizing the firm’s establishment of a formidable position in the Permian Basin’s heartland.
This acquisition complements Civitas’ previous venture in June, where it announced a staggering $4.7 billion deal with Hibernia Energy III LLC and Tap Rock Resources LLC.
Emerging from the amalgamation of four prominent Denver-Julesburg (DJ) Basin producers in 2021, Civitas has rapidly ascended as one of the major producers in the DJ play. Reflecting on the acquisition, Doyle added, “This deal ensures a harmonious balance between the Permian and DJ basins in our portfolio, mitigating operational risks and fortifying our business model.”
Ben Marshall, the chief of Vitol Americas, reiterated Vitol’s commitment to the upstream sector, affirming plans to continue exploring asset additions.
This strategic move is projected to elevate Civitas’ Permian production to approximately 170,000 boe/d by 2024. An estimated 50% of this would be attributed to natural gas. Management anticipates a total company production ranging between 325-345,000 boe/d for 2024, combined with capital expenses approximating $1.95-2.25 billion.
The payment structure includes issuing 7.3 million shares of common stock to Vencer, coupled with a $1.55 billion cash payment. Civitas envisions amalgamating debt and equity financing to facilitate the cash segment of the acquisition.
Esteemed financial advisories, BofA Securities, J.P. Morgan Securities LLC, and RBC Capital Markets are actively assisting Civitas in this venture. Legal consultations are being provided by Kirkland & Ellis, with DrivePath Advisors offering communication counsel. Vencer’s legal advisories come from Latham & Watkins LLP.
Industry analysts have expressed optimism regarding the acquisition. Gabriele Sorbara of Siebert, Williams Shank commented that the deal’s attractive pricing in the current market sets it apart. The acquisition’s valuation stands out at $33,760 per flowing boe/d of production and $1.1 million per gross location.
