Civitas Resources announced on Wednesday that it has reached an agreement to purchase assets in the Midland Basin of west Texas from Vencer Energy for a total of $2.1 billion.
Expanding Operations in the Midland Basin
The acquisition will significantly expand Civitas’ presence in the Midland Basin, adding approximately 44,000 net acres to its portfolio. The acquired assets currently produce 62,000 barrels of oil equivalent per day, with oil accounting for half of this output.
Boosting Cash Flow Generation
Civitas anticipates that the acquisition will have an immediate positive impact on its free cash flow generation. It expects the newly acquired assets to contribute to a 5% increase in free cash flow per share by 2024.
Funding the Acquisition
To finance the acquisition, Civitas plans to issue 7.3 million shares of its stock to Vencer and provide $1.55 billion in cash. The remaining $550 million will be paid one year after the deal is closed in January.
Strengthening the Portfolio
Civitas’ CEO, Chris Doyle, highlighted the strategic benefits of the acquisition. With a balanced portfolio between the Permian and DJ basins, the company can reduce operational risks and establish itself as a more robust and sustainable enterprise.
Projected Production Increase
Including the newly acquired assets, Civitas expects its total production to reach between 325,000 and 345,000 barrels per day by 2024. This is a significant increase from its previous projection of 270,000 to 290,000 barrels.
Adjusting Capital Expenditures
As a result of the acquisition, Civitas also adjusted its capital expenditure estimates. It now forecasts a range of $1.95 billion to $2.25 billion, compared to the previous range of $1.6 billion to $1.8 billion.
In summary, Civitas Resources is set to expand its operations in the Midland Basin through the acquisition of assets from Vencer Energy. This move is expected to enhance free cash flow generation, increase production, and solidify Civitas’ position in the industry.
