Colorado oil and gas producers and have agreed to an all-stock merger valued at $2.6 billion to create a new company named Civitas Resources.
The companies said Monday in a statement that the combined corporation will operate on about 425,000 acres and have a daily production base equivalent to117,000 barrels of oil. They expect the merger to save about $25 million annually.
Bonanza Creek’s operations are concentrated in the rural portions of the Wattenberg Field in Colorado’s Denver-Julesburg Basin, according to the company’s website. Extraction has tended to operate in some of the fastest-growing areas along the Front Range.
Extraction emerged from Chapter 11 bankruptcy in January. Funds managed by Kimmeridge Energy, which has an office in Denver, own approximately 38% percent of the outstanding shares of Extraction
Bonanza Creek President and CEO Eric Greager will serve as president and CEO of Civitas. Ben Dell, Extraction board chairman, will be chairman of Civitas.
The transaction is expected to close in the third quarter of 2021 and has been unanimously approved by the boards of both companies.
The deal is a true merger of equals, said Andrew Dittmar, senior mergers and acquisitions analyst with Enverus. Each company will receive a 50% ownership stake in the new company, he said in an email.
“The combination is the first significant corporate deal between public companies in 2021 after public (exploration and production) consolidation dominated deal markets last year,” Dittmar said. “Like the deals from 2020, the combination is a low-premium equity swap with no cash changing hands.”
Bonanza Creek and Extraction said the merger is a major step in efforts to reduce costs, increase returns and cash distributions to shareholders. Bonanza Creek’s recently announced annual dividend of $1.40 per share is expected to increase to $1.60 per share when the merger closes.
Bonanza Creek acquired HighPoint Resources Corp. in 2020. At the time, the companies said the deal would significantly increase their free cash flow, a major goal for oil and gas companies that have increasingly faced pressure from investors to reduce their debt.
