01/16/2025
Civitas Resources is reportedly considering the sale of its oil and gas ...
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01/16/2025
Civitas Resources is reportedly considering the sale of its oil and gas assets in Colorado’s Denver-Julesburg (D-J) Basin and may reinvest the proceeds in acquiring additional assets in the Permian Basin, including the highly sought-after position held by Double Eagle IV, according to analysts and media reports.
The Denver-based exploration and production company has engaged a financial adviser to evaluate buyer interest in its Colorado assets. However, Civitas has not confirmed these reports or responded to inquiries for comment.
STRATEGIC DIVESTMENT IN THE D-J BASIN
Civitas’ D-J Basin assets, which produced an average of approximately 160,000 barrels of oil equivalent per day (boe/d) in the third quarter of 2024, could be sold in whole or in parts. Analysts estimate the portfolio could command a price of around $4 billion, based primarily on proved developed producing (PDP) reserves. This valuation suggests limited credit for undeveloped drilling inventory, reflecting the regulatory challenges and relatively short inventory life associated with the Colorado position.
“A PDP-only deal makes sense given the constraints within Colorado,” TD Cowen analyst Gabe Daoud Jr. noted in a recent report.
A MOVE TOWARD THE PERMIAN BASIN
Proceeds from a potential D-J Basin sale could be directed toward acquiring Double Eagle IV, a leading private operator in the Permian Basin’s Midland sub-basin. Analysts view the acquisition as a logical step for Civitas, given its existing Midland Basin acreage, but caution that the deal carries risks. Double Eagle’s limited inventory of around 424 drilling locations and a likely high asking price could present challenges.
Previously, Ovintiv was considered a potential buyer for Double Eagle. Still, the company shifted focus to Canada, acquiring Montney Shale assets for $2.38 billion while divesting its Uinta Basin properties in Utah.
CIVITAS' EXPANDING FOOTPRINT
Founded in 2021 through the merger of Bonanza Creek Energy, Extraction Oil & Gas, and Crestone Peak, Civitas initially focused on Colorado operations. However, the need for additional drilling inventory led the company to invest nearly $7 billion in Permian Basin acquisitions during 2023.
Key transactions included:
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Hibernia Energy III: Acquired for $2.2 billion, providing Midland Basin assets.
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Tap Rock Resources: Purchased for $2.5 billion, adding Delaware Basin operations.
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Vencer Energy: Acquired for $2 billion from Vitol, further consolidating Midland Basin acreage.
Since entering the Permian, Civitas has prioritized cost optimization and operational efficiency while continuing to develop long laterals in the D-J Basin. The company achieved a 5% reduction in per-foot drilling costs for its four-mile wells compared to three-mile laterals, according to CFO Marianella Foschi.
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