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Civitas Resources Advances with Midland Assets in a $2.1 Billion Agreement
11/03/2023
Denver-rooted Civitas Resources, Inc. concluded an arrangement to acquire Vencer Energy's assets in the Midland Basin from Vitol for an approximate $2.1 billion.
The $2.1 billion arrangement between Civitas Resources and Vencer Energy is a strategic maneuver that enlarges Civitas' presence in the resource-rich Permian Basin. By securing approximately 44,000 net acres, Civitas not only acquires a substantial asset but also amplifies its production capacity by 62 to 62.5 Mboe/d. The transaction, which is anticipated to complete in January, is perceived as a cost-effective acquisition that markedly enhances Civitas Resources’ scale in the Permian Basin.
The total value of the transaction stands at $2.15 billion, which will be paid through a combination of 7.3 million shares of common stock, to be issued to Vencer, and $1.55 billion in cash. Out of the cash amount, $1 billion is to be paid at the time of closing, with the outstanding $550 million scheduled for payment on January 3, 2025. Should Civitas decide to expedite the deferred cash payment to the deal's closing date, the overall purchase price would be reduced by $50 million, bringing it down to $2.05 billion.
This acquisition exemplifies Civitas Resources’ ongoing commitment to expanding its operational base and capitalizing on lucrative opportunities within the Permian Basin. It also reflects the strategic importance of the Midland Basin assets, which are anticipated to be a game-changer in Civitas' quest for enhanced growth and operational efficiency.
"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. 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."
- Chris Doyle, Civitas President & CEO.
Highlights
- The purchase is priced well, especially when compared to other recent similar deals. It's expected to increase cash earnings for each share right away. About 80% of the buying price is supported by the value of certain reserves, and there's potential for more value in the future. It's expected that this deal will increase cash earnings per share by about 5% in 2024, with Civitas planning to have around $1.8 billion of free cash flow in 2024, given certain market conditions.
- After this purchase, Civitas is aiming for more production and has budgeted between $1.95 to $2.25 billion for spending in 2024.
- This deal will add around 400 new development spots mainly in two regions. About 40% of these new spots are expected to have high returns, especially if oil prices reach $70 per barrel. After the deal, Civitas will have more than 1,200 good oil development spots in the area.
- With more cash flow, shareholders could see better returns. Civitas is also planning to sell off some assets by mid-2024 to reduce debt, which in turn could lead to a stronger financial standing. The aim is to have a lower debt ratio by the end of 2024, which would be good for the company's finances.
About Civitas Resources
Civitas Resources, Inc. is a Denver-stationed company recognized for its operations in the energy sector. The acquisition of assets in the Midland Basin exemplifies Civitas' strategic focus on strengthening its standing in key oil-producing regions.
About Vitol
Vitol is a prominent player in the energy field, having a wide reach that spans from oil to electricity, renewables, and carbon. They handle the trade of 7.4 million barrels of crude oil and other products daily, and organize around 6,000 sea journeys annually.
Vitol collaborates with a variety of partners like national oil firms, big multinational companies, major industrial entities, and utility providers. Established in Rotterdam in 1966, Vitol now has operations in about 40 global offices and has investments in energy assets worldwide. These include global storage of 17 million cubic meters, about 500 thousand barrels per day of refining capacity, over 7,000 service stations, and an expanding collection of transitional and renewable energy assets. In 2022, they reported revenues of $505 billion.
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