Civitas Resources Adds Accretive Bolt-on in Permian Basin
- Acquisition is attractively priced and immediately accretive to Free Cash Flow per share with an estimated 5% uplift in 2024. Increases Permian Basin scale and adds premium, low breakeven oil inventory. Civitas expects to generate approximately $1.8 billion of Free Cash Flow in 2024. Strengthens capital structure and maintains shareholder return program. Portfolio will be balanced between Permian and DJ basins, reducing operational risk. Positive outlook for 2024 with the ability to flex capital investments and activity levels between assets.
- None.
Acquisition increases Free Cash Flow and balances portfolio between Permian and DJ Basins
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
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Attractively priced and immediately accretive to Free Cash Flow per share: The Acquisition is attractively priced at 2.8x 2024 estimated Adjusted EBITDAX at
/Bbl NYMEX WTI and$80 /MMBtu NYMEX Henry Hub, which compares favorably to recent transactions in the Permian Basin. Approximately$3.50 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 estimated5% uplift to Free Cash Flow per share in 2024. Pro forma, Civitas expects to generate approximately of Free Cash Flow in 2024 at$1.8 billion /Bbl and$80 /MMBtu.$3.50
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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 (approximately50% 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
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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 than40% at /Bbl WTI. Pro forma for the Acquisition, Civitas will have more than 1,200 high-quality oil development locations in the Permian Basin.$70
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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
/Bbl NYMEX WTI and$80 /MMBtu NYMEX Henry Hub. Civitas intends to optimize its asset portfolio through non-core asset sales, including its previously announced plans to sell approximately$3.50 in non-core assets in the DJ Basin by mid-2024, with proceeds allocated to debt reduction.$300 million
“This was a unique opportunity to capture high-quality oil assets at a very attractive price,” said Chris Doyle, Civitas President & CEO. “In recent months, we have created a quality, scaled position in the heart of the Permian Basin. We continue to advance our strategic pillars by adding premium inventory, increasing Free Cash Flow, and delivering the industry’s best cash returns to shareholders. Upon closing, our portfolio will be balanced between the Permian and DJ basins, which reduces operational risk and makes us a stronger and more sustainable enterprise.”
Financing
Total consideration for the Acquisition is approximately
Outlook
With three producing basins, Civitas will have the ability to flex capital investments and activity levels between assets to maximize returns, ensure desired outcomes, and mitigate potential operational and timing risks. Civitas’ updated outlook for 2024, incorporating the positive impacts of the Acquisition, is shown below (due to the timing of closing in early 2024, previously provided 2023 guidance remains unchanged).
|
Civitas Prior 2024 |
Vencer 2024(1) |
Civitas Pro Forma 2024 Combined(1) |
Total Production (Mboe/d) |
270 − 290 |
50 – 60 |
325 – 345 |
Oil Production (Mboe/d) |
130 − 140 |
23 – 28 |
155 – 165 |
% Liquids |
71 − |
73 − |
71 − |
Capital Expenditures ($MM) |
|
|
|
(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
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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
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
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Investor Relations:
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Source: Civitas Resources, Inc.