Published: November 12, 2021 |

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Denver oil and gas companies completed a $4.5 billion merger that combined three of the top 10 oil producers in the state into one.

Shareholders in Bonanza Creek Energy and Extraction Oil & Gas voted overwhelmingly in favor of the combination Friday, adding to the previous board approval of privately-held Crestone Peak Resources. The three-way deal between the companies closed Monday.

The new company is now called Civitas Resources Inc. and its shares are expected to start trading Tuesday.

The combined company has high-quality operations and acreage from which to produce, a low-cost structure, meaningful free cash-flow generation and low debt, said Eric Greager, president and CEO of Civitas, who had been CEO at Bonanza Creek.

“The integration of Extraction and Crestone is proceeding very well. And we believe that the combined companies’ ability to operate safely and efficiently during this process of consolidation and change affirms the operational excellence at the heart of Civitas,” Greager said in a written statement.

The new company has oil and gas acreage in rural central Weld County, as well as territory and wells along the Interstate 25 corridor north of the Denver metro area, and to the east in and near Aurora.

There’s a fair amount of integration ahead, including moving the three companies’ downtown Denver headquarters offices, which are spread across 10 floors in four buildings, into one three-story space in 555 17th St., Greager said. That office used to be the headquarters of Highpoint Resources, a Denver oil producer that Bonanza Creek Energy acquired in a deal that closed April 1.

Civitas is consolidating three Weld County field offices into one, in Windsor, with another field office east of the metro area, in Watkins.

The integration ahead is really one that blends what had been four companies at the start of the year.

“We’ve got an asset that is scaled adequately, and we’ve got more than enough high-quality production locations and inventory to execute our plan,” Greager said.

The company also has relatively little debt, he said, so it can reinvest about half the free cash-flow from operations it generates before depreciation, taxes and similar expenses, in returning cash to shareholders in the form of dividends or stock buybacks, or look at value-adding acquisitions or mergers while still maintaining current production volumes.

“We can do that year after year after year without interruption,” Greager said.

About 360 people work at Civitas today, though that number will shrink to about 300 after employees only kept on for the transition period finish their jobs around year end.

The merger first came together May 10, when Bonanza Creek and Extraction, which had emerged in January from Chapter 11 bankruptcy reorganization, struck a deal to merge as equals. Soon after, Crestone Peak Resources agreed to be acquired by the merging businesses, setting up the two-stage deal that was completed Monday.

Extraction and Bonanza Creek shareholders each own 37 percent of Civitas, while the owners of Crestone Peak own 26 percent.

Civitas expects to produce an average of 160,000 barrels of oil and gas equivalents per day from its 525,000 acres of operating area on the northern Front Range.

Extraction co-founder Matt Owens will serve as executive vice president and chief operating officer of Civitas. Marianella Foschi, Extraction executive vice president and chief financial officer, stays in that role for the new company, and Brian Cain, from Extraction, becomes chief sustainability officer at Civitas Resources.

Civitas’ nine-member board of directors is made of four members each from Bonanza Creek and Extraction and one from Crestone Peak Resources. Ben Dell, who had been Extraction chairman and is managing partner of New York City-based private equity firm Kimmeridge Energy Management Company. is now chairman of the Civitas board.

He was instrumental in the merger and has said Civitas may consolidate other companies in the basin.

“Civitas embodies an [exploration and production] model that is poised to deliver value for all of our stakeholders through disciplined capital deployment, operational and cost excellence, and governance standards aligned with the highest expectations — including our status as Colorado’s first carbon neutral oil and gas producer,” Ben Dell said in the announcement of the closing.

The company is exploring several strategies to reduce or offset the greenhouse gas emissions of its operations and those of its vendors.

Civitas Resources is the largest company based in Denver and focused on production solely from the Denver-Julesburg Basin in the state.

Occidental Petroleum, based in Houston, and Chevron Corp., based in San Ramon, California, and Denver-based PDC Energy Inc. produce more oil and gas in Colorado than Civitas, but those other companies operate wells in other states or countries in addition to the Denver-Julesburg Basin. 

Source: Denver Business Journal

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