Bonanza Creek Energy has signed an agreement to merge with Extraction Oil & Gas to create a combined oil and gas company with an enterprise value of $2.6bn.
To be named Civitas Resources, the combined entity is expected to be one of the largest pure-play energy producers in Colorado’s Denver-Julesburg (DJ) Basin.
Currently, Bonanza Creek’s assets and operations are concentrated in rural, unincorporated Weld County, Colorado, within the DJ Basin.
Extraction is engaged in developing and producing crude oil, natural gas and natural gas liquids (NGLs) in the basin.
Following the completion of the transaction, Bonanza Creek and Extraction shareholders will each hold nearly 50% stake of Civitas.
The transaction is anticipated to be closed in the third quarter of 2021.
With a production base of 117 thousand barrels of oil equivalent per day, Civitas will operate across approximately 425,000 net acres.
Extraction chief executive officer said: “We believe the combination of Bonanza Creek and Extraction will create one of the most durable, profitable, and progressive producers in the DJ Basin, with premium assets at the front end of the cost curve.
“Collectively, we will create significant value for all stakeholders as we will become Colorado’s first net-zero oil and gas producer through the continuing reduction in operational emissions coupled with a multi-year investment in certified emissions offsets.”
Civitas is expected to generate nearly $25m in annual corporate synergies, including general and administrative savings and reduced capital costs.
Bonanza Creek and Extraction intend to position Civitas as the preferred consolidation partner for additional transactions in the DJ Basin.
Civitas is also anticipated to pursue sustainability objectives including the adoption of an electric vehicle (EV) fleet and installation of EV charging stations in its communities.
J.P. Morgan Securities is serving as financial advisor to Bonanza Creek, while Vinson & Elkins is its legal advisor.
In November last year, Bonanza Creek Energy announced the acquisition of Denver, Colorado-based HighPoint Resources in a deal worth $376m.
