Civitas Resources has agreed to acquire the oil producing assets of Vitol-backed Vencer Energy held in the Midland Basin, US in a deal worth around $2.1bn.
The deal gives Civitas Resources an estimated 400 gross development locations, which are located mainly in the Spraberry and Wolfcamp formations in west Texas.
It will add around 44,000 net acres in the Midland Basin with current production of around 62,000 barrels of oil equivalent per day (boe/d), of which nearly 50% is oil.
Pro forma for the transaction, the 2024 estimated production for Civitas Resources in the Permian is projected to be around 170Mboe/d with almost 50% of that being oil.
The company’s overall production for 2024 is expected to be in the range of 325Mboe/d and 345Mboe/d. Its total capital expenditures for 2024 have been pegged at $1.95bn -$2.25bn.
Nearly 40% of the new locations to be added through the deal have a projected internal rate of return (IRR) of over 40% at $70/Bbl WTI.
Following the completion of the deal, Civitas Resources will take the number of high-quality oil development locations it has in the Permian Basin to more than 1,200.
Civitas Resources president and CEO Chris Doyle said: “This was a unique opportunity to capture high-quality oil assets at a very attractive price.
“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.”
The consideration for the deal will be made up of nearly 7.3 million shares of common stock to be issued to Vencer Energy along with a cash component of $1.55bn.
Vencer Energy, which was established in 2020, purchased its foundational asset base of 44,000 net acres in the Midland Basin in the following year. The company’s production across its acreage since then is said to have grown from nearly 40mboepd to 60mboepd.
Vitol Americas head Ben Marshall said: “We are pleased to announce this deal with Civitas Resources and believe the Vencer assets will be an exciting complement to their growing position in the Permian. We also want to thank Don Dotson, Vencer’s CEO, and the rest of the Vencer Energy team for their hard work and tremendous results over the past 3.5 years.
“Vitol remains enthusiastic about the upstream sector, and we are committed to deploying more capital in this space. We actively continue to look for more assets to add to our portfolio, whether it be through VTX Energy or via a new platform.”
The deal is anticipated to close in January 2024.
