Acquisition increases Free Cash Flow and
balances portfolio between Permian and DJ Basins
Civitas Resources (NYSE: CIVI) (“Civitas”) today signed an
agreement with Vencer Energy (“Vencer”), a Vitol investment, to
acquire oil producing assets in the Midland Basin of west Texas for
a total consideration of approximately $2.1 billion, subject to
customary terms, conditions, and closing price adjustments (the
“Acquisition”). The Acquisition is expected to close in January
2024 with an effective date of January 1, 2024.
Civitas plans to hold a conference call to discuss the
Acquisition at 7:00 a.m. MDT (9:00 a.m. EDT) on October 4, 2023.
Participation details are included within this release. Additional
details are available in a new slide deck, which can be found at
www.civitasresources.com.
Highlights
- Attractively priced and immediately accretive to Free Cash
Flow per share: The Acquisition is attractively priced at 2.8x
2024 estimated Adjusted EBITDAX at $80/Bbl NYMEX WTI and
$3.50/MMBtu NYMEX Henry Hub, which compares favorably to recent
transactions in the Permian Basin. Approximately 80% of the
purchase price is underwritten by the value of proved developed and
proved developed non-producing reserves, with significant upside in
future developments. The Acquisition is expected to deliver an
estimated 5% uplift to Free Cash Flow per share in 2024. Pro forma,
Civitas expects to generate approximately $1.8 billion of Free Cash
Flow in 2024 at $80/Bbl and $3.50/MMBtu.
- Increases Permian Basin scale, balancing Civitas’ portfolio
between premium Permian and DJ positions: The Acquisition will
add approximately 44,000 net acres in the Midland Basin and current
production of approximately 62 Mboe/d (approximately 50% oil). Pro
forma for the Acquisition, Civitas’ 2024 estimated Permian
production is expected to be about 170 Mboe/d (approximately 50%
oil). Pro forma for the Acquisition, Civitas expects that its 2024
total company production will be 325 – 345 Mboe/d and total capital
expenditures will be $1.95 – $2.25 billion.
- Adds premium, low breakeven oil inventory in the Midland
Basin: The Acquisition will add an estimated 400 gross
development locations located primarily in the Spraberry and
Wolfcamp formations. Approximately 40% of the new locations have an
estimated IRR of more than 40% at $70/Bbl WTI. Pro forma for the
Acquisition, Civitas will have more than 1,200 high-quality oil
development locations in the Permian Basin.
- Maintains peer-leading shareholder return program,
strengthens capital structure: Higher cash flow will benefit
shareholders through Civitas’ existing variable dividend framework.
Civitas expects its Net Debt/Adjusted EBITDAX leverage ratio to be
approximately 1.1x at closing and improve to approximately 0.9x at
year-end 2024 at $80/Bbl NYMEX WTI and $3.50/MMBtu NYMEX Henry Hub.
Civitas intends to optimize its asset portfolio through non-core
asset sales, including its previously announced plans to sell
approximately $300 million in non-core assets in the DJ Basin by
mid-2024, with proceeds allocated to debt reduction.
“This was a unique opportunity to capture high-quality oil
assets at a very attractive price,” said Chris Doyle, Civitas
President & CEO. “In recent months, we have created a quality,
scaled position in the heart of the Permian Basin. We continue to
advance our strategic pillars by adding premium inventory,
increasing Free Cash Flow, and delivering the industry’s best cash
returns to shareholders. Upon closing, our portfolio will be
balanced between the Permian and DJ basins, which reduces
operational risk and makes us a stronger and more sustainable
enterprise.”
Financing
Total consideration for the Acquisition is approximately $2.1
billion, consisting of approximately 7.3 million shares of common
stock to be issued to Vencer and $1.55 billion of cash, of which $1
billion will be due at closing. The remaining $550 million will be
payable on January 3, 2025. Civitas has the option to accelerate
the deferred cash payment to the closing of the Acquisition, which
would lower the total purchase price by $50 million to $2.05
billion. Civitas plans to fund the cash portion of the purchase
price with a combination of debt and equity financings.
Outlook
With three producing basins, Civitas will have the ability to
flex capital investments and activity levels between assets to
maximize returns, ensure desired outcomes, and mitigate potential
operational and timing risks. Civitas’ updated outlook for 2024,
incorporating the positive impacts of the Acquisition, is shown
below (due to the timing of closing in early 2024, previously
provided 2023 guidance remains unchanged).
Civitas Prior 2024
Vencer 2024(1)
Civitas Pro Forma 2024
Combined(1)
Total Production (Mboe/d)
270 − 290
50 – 60
325 – 345
Oil Production (Mboe/d)
130 − 140
23 – 28
155 – 165
% Liquids
71 − 74%
73 − 75%
71 − 74%
Capital Expenditures ($MM)
$1,600 − $1,800
$350 − $450
$1,950 − $2,250
(1) Assumes an estimated close date of
January 1, 2024.
Advisors
BofA Securities is serving as lead financial advisor and J.P.
Morgan Securities LLC and RBC Capital Markets are also providing
financial advice. Kirkland & Ellis is serving as legal advisor,
and DrivePath Advisors is serving as communication advisor for
Civitas.
Vencer was advised by Latham & Watkins LLP.
Conference Call Information
Civitas plans to host a conference call to discuss the
Acquisition at 7:00 a.m. MDT (9:00 a.m. EDT) on October 4, 2023. To
participate in the call, please dial toll free (888) 510-2535 or
(646) 960-0342 and use Conference ID 4872770. A live webcast will
be available on the Investor Relations section of Civitas’ website
at www.civitasresources.com.
About Civitas Resources, Inc.
Civitas Resources, Inc. is an independent, domestic oil and gas
producer focused on development of its premier assets in the
Denver-Julesburg (“DJ”) and Permian Basins. Civitas has a proven
business model combining capital discipline, a strong balance
sheet, cash flow generation and sustainable cash returns to
shareholders. Civitas employs leading ESG practices and was
Colorado’s first carbon neutral oil and gas producer. For more
information about Civitas, please visit
www.civitasresources.com.
About Vitol
Vitol is a leader in the energy sector with a presence across
the spectrum: from oil to power, renewables and carbon. Vitol
trades 7.4 million barrels per day of crude oil and products, and
charters around 6,000 sea voyages every year.
Vitol's counterparties include national oil companies,
multinationals, leading industrial companies and utilities. Founded
in Rotterdam in 1966, today Vitol operates from some 40 offices
worldwide and is invested in energy assets globally including: 17 m
m3 of storage globally, roughly 500 k b/d of refining capacity,
over 7,000 service stations and a growing portfolio of transitional
and renewable energy assets. Revenues in 2022 were $505 billion.
For more information about Vitol, please visit www.vitol.com.
Forward-Looking Statements and Cautionary Statements
Certain statements in this press release concerning future
opportunities for Civitas, future financial performance and
condition, guidance and any other statements regarding Civitas’
future expectations, beliefs, plans, objectives, financial
conditions, returns to shareholders assumptions or future events or
performance that are not historical facts are “forward-looking”
statements based on assumptions currently believed to be valid.
Forward-looking statements are all statements other than statements
of historical facts. The words “anticipate,” “believe,” “ensure,”
“expect,” “if,” “intend,” “estimate,” “probable,” “project,”
“forecasts,” “predict,” “outlook,” “aim,” “will,” “could,”
“should,” “would,” “potential,” “may,” “might,” “anticipate,”
“likely” “plan,” “positioned,” “strategy,” and similar expressions
or other words of similar meaning, and the negatives thereof, are
intended to identify forward-looking statements. Specific
forward-looking statements include statements regarding Civitas’
plans and expectations with respect to the Acquisition and the
anticipated impact of the Acquisition on Civitas’ results of
operations, financial position, growth opportunities, reserve
estimates and competitive position. The forward-looking statements
are intended to be subject to the safe harbor provided by Section
27A of the Securities Act of 1933, as amended, Section 21E of the
Securities Exchange Act of 1934, as amended, and the Private
Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, Civitas’
future financial condition, results of operations, strategy and
plans; the ability of Civitas to realize anticipated synergies
related to the Acquisition in the timeframe expected or at all;
changes in capital markets and the ability of Civitas to finance
operations in the manner expected; the effects of commodity prices;
and the risks of oil and gas activities. Additionally, risks and
uncertainties that could cause actual results to differ materially
from those anticipated also include: declines or volatility in the
prices we receive for our oil, natural gas, and natural gas
liquids; general economic conditions, whether internationally,
nationally or in the regional and local market areas in which we do
business, including any future economic downturn, the impact of
continued or further inflation, disruption in the financial markets
and the availability of credit on acceptable terms; our ability to
identify and select possible additional acquisition and disposition
opportunities; the effects of disruption of our operations or
excess supply of oil and natural gas due to world health events and
the actions by certain oil and natural gas producing countries
including Russia; the continuing effects of the COVID-19 pandemic,
including any recurrence or the worsening thereof; the ability of
our customers to meet their obligations to us; our access to
capital on acceptable terms; our ability to generate sufficient
cash flow from operations, borrowings, or other sources to enable
us to fully develop our undeveloped acreage positions; our ability
to pursue potential capital management activities such as share
repurchases, paying dividends at their current level or at all, or
additional mechanisms to return excess capital to shareholders; the
presence or recoverability of estimated oil and natural gas
reserves and the actual future sales volume rates and associated
costs; uncertainties associated with estimates of proved oil and
gas reserves; the possibility that the industry may be subject to
future local, state, and federal regulatory or legislative actions
(including additional taxes and changes in environmental, health
and safety regulation and regulations addressing climate change);
environmental, health and safety risks; seasonal weather
conditions, as well as severe weather and other natural events
caused by climate change; lease stipulations; drilling and
operating risks, including the risks associated with the employment
of horizontal drilling and completion techniques; our ability to
acquire adequate supplies of water for drilling and completion
operations; availability of oilfield equipment, services, and
personnel; exploration and development risks; operational
interruption of centralized oil and natural gas processing
facilities; competition in the oil and natural gas industry;
management’s ability to execute our plans to meet our goals;
unforeseen difficulties encountered in operating in new geographic
areas; our ability to attract and retain key members of our senior
management and key technical employees; our ability to maintain
effective internal controls; access to adequate gathering systems
and pipeline take-away capacity; our ability to secure adequate
processing capacity for natural gas we produce, to secure adequate
transportation for oil, natural gas, and natural gas liquids we
produce, and to sell the oil, natural gas, and natural gas liquids
at market prices; costs and other risks associated with perfecting
title for mineral rights in some of our properties; political
conditions in or affecting other producing countries, including
conflicts in or relating to the Middle East, South America and
Russia (including the current events involving Russia and Ukraine),
and other sustained military campaigns or acts of terrorism or
sabotage; and other economic, competitive, governmental,
legislative, regulatory, geopolitical, and technological factors
that may negatively impact our businesses, operations, or pricing.
Expectations regarding business outlook, including changes in
revenue, pricing, capital expenditures, cash flow generation,
strategies for our operations, oil and natural gas market
conditions, legal, economic and regulatory conditions, and
environmental matters are only forecasts regarding these
matters.
Additional information concerning other risk factors is also
contained in Civitas’ most recently filed Annual Report on Form
10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
and other Securities and Exchange Commission filings. All
forward-looking statements speak only as of the date they are made
and are based on information available at that time. Civitas does
not assume any obligation to update forward-looking statements to
reflect circumstances or events that occur after the date the
forward-looking statements were made or to reflect the occurrence
of unanticipated events except as required by federal securities
laws. As forward-looking statements involve significant risks and
uncertainties, caution should be exercised against placing undue
reliance on such statements.
Non-GAAP Measures
To provide investors with additional information in connection
with our results as determined in accordance with generally
accepted accounting principles in the United States (“GAAP”), we
disclose certain non-GAAP financial measures. The non-GAAP
financial measures include Net Debt, Adjusted EBITDAX, Free Cash
Flow and related calculations. We believe the non-GAAP financial
measures provide users of our financial information with additional
meaningful comparisons between the current results and results of
prior periods, as well as comparisons with peer companies. These
non-GAAP financial measures are not measures of financial
performance in accordance with GAAP and may exclude items that are
significant in understanding and assessing our financial results.
Therefore, these measures should not be considered in isolation or
as an alternative or superior to GAAP measures. You should be aware
that our presentation of these measures may not be comparable to
similarly-titled measures used by other companies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231004846293/en/
For further information, please contact:
Investor Relations: John Wren, ir@civiresources.com
Media: Rich Coolidge, info@civiresources.com
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