Colorado Drillers to Combine, as Consolidation Continues in Oil Patch

Bonanza Creek Energy and Extraction Oil & Gas are the latest to tie up, creating a $2.3 billion company

May 10, 2021 Stu Turley Finance, M & A, Top News

Two oil-and-gas producers that operate in Colorado— Bonanza Creek Energy Inc. BCEI -1.32% and Extraction Oil & Gas Inc. XOG 1.12% —plan to announce Monday that they are combining into a company valued at about $2.3 billion.

finviz dynamic chart for BCEI

finviz dynamic chart for XOG

The all-stock, no-premium merger of companies that produce in Colorado’s Denver-Julesburg Basin is the latest example of regional consolidation in U.S. oil and gas fields, as the energy industry emerges from the Covid-19 pandemic.

The combined company will be renamed Civitas Resources Inc. and become the largest pure-play oil-and-gas company in the DJ Basin. Bonanza and Extraction shareholders will respectively own 50% of the new company, according to a person familiar with the matter.

The tie-up follows shale-gas producer EQT Corp.’s agreement last week to scoop up the assets of smaller rival, Alta Resources Development LLC, for $2.9 billion in cash and stock, which will expand its northeastern U.S. footprint. EQT, the largest U.S. natural gas producer, said in October that it would purchase upstream and midstream assets from Chevron Corp. for $735 million, also in the Northeast.

In Texas, Pioneer Natural Resources Co. last month agreed to spend $6.4 billion to purchase DoublePoint Energy, a private operator with acreage close to Pioneer’s in the Permian Basin of West Texas and New Mexico.

That deal came months after Pioneer, led by Chief Executive Scott Sheffield, closed a transaction purchasing Parsley Energy Inc., another Permian producer co-founded by Mr. Sheffield’s son, Bryan, in a deal valued at $4.5 billion.

In recent years, following a crash in oil prices in 2015, shale drillers have bought smaller rivals for much lower premiums than they had in the first half of the last decade. Extraction and Bonanza Creek, both based in Denver, were valued roughly the same on the stock market Friday, with market capitalizations of $1.12 billion and $1.15 billion, respectively.

Once combined, the companies plan to lift Bonanza Creek’s annual dividend about 14% to $1.60 per share. Civitas’s production will be equivalent to 117,000 barrels of oil equivalent a day, over 430,000 net acres. By combining, Civitas would generate at least $25 million in annual savings, a person familiar with the matter said.

Bonanza Creek Chief Executive Eric Greager will serve as CEO of Civitas, while Ben Dell, Chairman of Extraction, will become chairman of the new company, the person said. Mr. Dell is also managing partner at investment firm Kimmeridge Energy, which owns about 38% of Extraction.

Extraction emerged from chapter 11 bankruptcy in January after filing last summer during the pandemic. Bonanza Creek had filed and emerged from chapter 11 bankruptcy in 2017, following a previous downturn in oil prices.

About Stu Turley 3356 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.

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