Denver-based Civitas Resources inked a $2.1-billion stock-and-cash deal with global energy trading house Vitol to buy one of its portfolio companies with assets in the Permian Basin.
Civitas said in an announcement on 4 October that the acquisition of Vencer Energy, which was formed by Vitol in 2020, will add around 44,000 net acres to its current holdings along with nearly 62,000 BOE/D in production, roughly half of which is said to be crude oil. The buyer also said it will gain 400 new drilling locations in the prolific Wolfcamp and Spraberry formations.
Civitas said about 40% of the proposed well locations are expected to be highly lucrative, with projected initial rates of return above 40% at $70/bbl oil prices.
Post-acquisition, Civitas estimates that it holds around 1,200 future drilling locations and will see next year’s output average between 325,000 and 345,000 BOE/D.
The acquisition marked the third major deal struck by Civitas this year for a combined total that now nears $7 billion. In June, Civitas announced that it was expanding into the Permian by buying Tap Rock Resources and Hibernia Energy for a combined $4.7 billion. The move ended Civitas position as a pure-play operator in Colorado’s Denver-Julesburg (DJ) Basin.
Andrew Dittmar, a senior vice president at Enverus Intelligence Research, speculated that with DJ Basin inventory shrinking, Civitas had two choices: sell itself or acquire another company.
“And, if you are going to pick a new region to enter, there is nowhere better than the Permian. It has the most remaining Tier 1 and Tier 2 inventory plus the deepest roster of Tier 3 and Tier 4 locations as additional benches of stack pay are exploited,” he said.
Enverus analysis estimates that around 350 of the new drilling locations included in the deal have a breakeven oil price of just $45/bbl—a metric Dittmar said qualifies the deal as a “homerun” for Civitas.
Dittmar continued: “Over 300 of the net locations fall within the $50/bbl key breakeven pivot point investors look to when analyzing E&P equities, and there is enough inventory to sustain about 10 years of drilling on the Vencer asset with the two rigs Civitas plans to run.”
Terms of the deal will see Civitas transfer 7.3 million shares and $1.55 billion in cash to Vencer following closing, which is expected in January. Civitas said it will use debt and an equity raise to finance the cash portion of the agreement.
