Published: June 23, 2023 |

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Civitas Resources has signed two definitive agreements to acquire oil producing assets in the Midland and Delaware Basins of west Texas and New Mexico.

The agreements were signed with affiliates of Hibernia Energy III and Tap Rock Resources, which are respective portfolio companies of funds managed by NGP Energy Capital Management, for total consideration of approximately $4.7 billion.

The transactions will fundamentally transform Civitas into a stronger, more balanced, and sustainable enterprise with a deep inventory of high-return drilling opportunities in the heart of the Permian and DJ basins. Both transactions are subject to customary terms and conditions and are expected to close in the third quarter of 2023 with effective dates of July 1, 2023.

“These accretive and transformative transactions will immediately create a stronger, more balanced and sustainable Civitas. By acquiring attractively priced, scaled assets in the heart of the Permian Basin, we advance our strategic pillars through increased free cash flow and enhanced shareholder returns,” said Chris Doyle, Civitas president and CEO.

“We will soon have nearly a decade of price-resilient, high-return drilling inventory. Our strong capital structure allowed us to capture these transformational assets, and, importantly, behind the strength of the pro forma business, we have a clear path to reduce leverage and maintain long-term balance sheet strength,” added Doyle.

DELAWARE BASIN ENTRY

Civitas has agreed to purchase a portion of Tap Rock’s Delaware Basin assets for $2.45 billion, which includes $1.5 billion in cash and approximately 13.5 million shares of Civitas common stock valued at approximately $950 million. Tap Rock will retain its ownership of the Olympus development area.

The assets include approximately 30,000 net acres, primarily located in Eddy and Lea counties, New Mexico, an area widely considered to be the core of the Delaware Basin. First quarter 2023 average production was approximately 59 MBoe/d, of which 52 percent was oil. The company will have an inventory of approximately 350 high-quality locations in the Delaware Basin.

MIDLAND BASIN ENTRY

Civitas has also agreed to purchase Hibernia’s Midland Basin assets for $2.25 billion in cash. The assets include approximately 38,000 net acres in Upton and Reagan counties, Texas — an active and well delineated area in the Midland Basin. First quarter 2023 average production was approximately 41 MBoe/d, of which 56 percent was oil. The company will have an inventory of approximately 450 high-quality locations on a contiguous acreage position in the Midland Basin.

FINANCING

Total consideration for the two transactions is approximately $4.7 billion. Civitas plans to fund the two transactions through the incurrence of approximately $2.7 billion of unsecured senior debt, approximately 13.5 million shares of Civitas common stock valued at $950 million, approximately $600 million in borrowings under the company’s undrawn credit facility and approximately $400 million of cash-on-hand. Bank of America and JP Morgan are also providing Civitas with $3.5 billion of committed financing for the transaction.

Civitas Resources is Colorado’s first carbon neutral oil and gas producer and is focused on developing and producing crude oil, natural gas, and natural gas liquids in Colorado’s Denver-Julesburg Basin. The company is committed to pursuing compelling economic returns and cash flow while delivering best-in-class cost leadership and capital efficiency. Civitas is dedicated to safety, environmental responsibility, and implementing industry leading practices to create a positive local impact.

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