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Civitas Makes $4.7B Entry into Permian Basin
07/24/2023
Civitas Resources Expands into Denver-Julesburg Basin through $4.7B Cash and Stock Deals for NGP's Tap Rock and Hibernia.
Civitas Resources has recently secured two definitive agreements to expand its presence in the Permian Basin's Midland and Delaware basins. The company will achieve this expansion through the acquisition of two private exploration and production companies, namely Hibernia Energy III LLC and Tap Rock Resources LLC. The total value of the deal, paid in both cash and stock, amounts to $4.7 billion. Both Hibernia Energy III LLC and Tap Rock Resources LLC are supported by NGP Energy Capital Management LLC. These acquisitions reflect the increasing demand for oil and gas reserves in the Permian Basin, with companies specializing in the region actively seeking new opportunities. Currently, Civitas Resources' primary production operations are focused in the Denver-Julesburg Basin (D-J Basin).
"These accretive and transformative transactions will immediately create a stronger, more balanced and sustainable Civitas," Chris Doyle, Civitas president and CEO.
Scale and Reserves
- Civitas has gained immediate scale by acquiring 68,000 net acres in the Permian Basin, with 90% of these acres held by production (HBP).
- The acquired assets come with proved reserves totaling approximately 335 million barrels of oil equivalent (MMboe) as of the end of 2022.
Increased Production Base
- The acquisitions will result in a substantial increase in Civitas's existing production base, adding 100,000 barrels of oil equivalent per day (boe/d).
- This represents a 60% increase in Civitas's production, with 54% of the increase being oil production.
- Civitas anticipates that its production will average 105,000 boe/d from the time the deals close until the end of 2023.
Acquisition of Tap Rock's Delaware Basin Assets
- In the Delaware Basin, Civitas has agreed to purchase a portion of Tap Rock Resources LLC's assets for $2.45 billion.
- The deal includes $1.5 billion in cash and approximately 13.5 million shares of Civitas common stock valued at around $950 million.
- Tap Rock will retain ownership of the Olympus development area.
Delaware Basin Assets Details
- The acquired assets comprise approximately 30,000 net acres primarily located in Eddy and Lea counties, New Mexico.
- These acres are considered core Delaware acreage, an area known for its oil and gas potential.
- Tap Rock's production from these assets averaged around 59,000 boe/d in the first quarter, with 52% of it being oil production.
- Civitas also gains access to an inventory of approximately 350 drilling locations, providing valuable opportunities for future development.
Civitas is set to acquire Hibernia Energy III LLC's assets in the Midland Basin for $2.25 billion in cash, covering approximately 38,000 net acres in Upton and Reagan counties, Texas. These assets offer significant potential in the active and well-established region. The acquired assets averaged production of 41,000 boe/d in Q1 2023, with 56% being oil.
This expansion will give Civitas access to 450 drilling locations in the Midland Basin. With the acquisition of Hibernia Energy III LLC and Tap Rock Resources LLC, both managed by NGP Energy Capital Management LLC, Civitas aims to become a stronger, more diversified, and sustainable enterprise. This move establishes Civitas with two production centers: one in the Permian Basin, strengthened by the Midland and Delaware Basin acquisitions, and another in the Denver-Julesburg Basin (D-J Basin).
"By acquiring attractively priced, scaled assets in the heart of the Permian Basin, we advance our strategic pillars through increased free cash flow and enhanced shareholder returns. We will soon have nearly a decade of price-resilient, high-return drilling inventory," said Chris Doyle, Civitas president and CEO.
Civitas has stated that these deals will contribute a total of 800 gross locations. As a result, the company's pro forma oil-weighting is anticipated to increase significantly, approaching 50%. Civitas also expects to generate approximately $1.1 billion from these transactions. The company announced two private placements for a senior unsecured debt amounting to $2.7 billion.
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Chevron Announces Intent to Divest Oil and Gas Properties in New Mexico and Texas
According to Reuters, Chevron has recently made additional assets available for acquisition in both New Mexico and Texas. As part of its strategy to streamline operations following significant shale acquisitions, Chevron is reportedly offering multiple oil and gas properties for sale in New Mexico and Texas. Marketing documents reviewed by Reuters reveal the company's intention to divest these assets. Despite its prominent position as the largest publicly-traded oil and gas producer and property owner with 2.2 million acres in the Permian Basin of West Texas and New Mexico, Chevron has been actively divesting properties in the region. This divestment aligns with Chevron's efforts to optimize its portfolio and focus on its core operations.
Vital Energy Raises Production Outlook and Capital Spending with Significant Permian Basin Acquisition
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Exxon Mobil recently completed its acquisition of Pioneer Natural Resources, a deal worth about $60 billion. This transaction, which is the biggest in shale oil history, significantly changes the competitive landscape in the Permian Basin, a major oil field. This marks Exxon Mobil's largest deal since its $84.4 billion merger with Mobil Corp. in 1999. With this acquisition, Exxon Mobil's production in the Permian Basin will double to 1.3 million barrels of oil equivalent per day.
OXY has been the leader in Permian Basin production for the past five years. Currently, the Houston-based oil and gas company is deepening its presence in the basin with a $12 billion acquisition of CrownRock, adding over 94,000 acres in the Midland Basin and increasing its oil output by about 170,000 barrels per day. Occidental announced an increase in its proved reserves to 4.0 billion barrels of oil equivalent by the end of December 2023, up from 3.8 billion the previous year. Activities in the Permian largely fueled this rise. Occidental added approximately 303 million barrels through infill development projects as well as new discoveries and the further development of existing fields brought in another 153 million barrels.
TotalEnergies kicked off 2024 with a net income of $5.7 billion in the first quarter, marking a modest 3% increase from the same period last year and a 13% rise from the previous quarter. This growth occurred despite experiencing drops in both the volume and price of gas sales over the year and the quarter. Their adjusted net earnings, which exclude one-time or unusual items, were $5.1 billion. This represents a significant 22% decline compared to last year and a slight 2% drop from the last quarter. The company's earnings before tax, depreciation, and amortization reached $11.5 billion, while their cash flow from operations significantly decreased to $2.2 billion, falling by 58% from last year and a steep 87% from the previous quarter. TotalEnergies also recorded $644 million in impairments.