Monday, May 10, 2021

Bonanza Creek Energy - Extraction Oil & Gas -- May 10, 2021

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No longer a rumor: BCEI and XOG merger.

  • link here;
  • Bonanza Creek Energy: up 3.6% in pre-market trading
    • market cap: $1.1 billion
  • Extraction Oil & Gas: up 1.9% in pre-market trading
    • market cap: 1.1 billion


  • Extraction shareholders to receive 1.1711 shares of Bonanza for each share of Extraction
  • Civitas: new name
  • aggregate enterprise value: $2.6 billion
  • shareholders will each own 50% of Civitas
  • expected to close3Q21

Strategic rationale? See link below.

From StreetInsider:

  • The merger will create a leading energy producer in Colorado's DJ Basin, a basin characterized by low operating costs, extensive infrastructure, ample takeaway, multiple producing horizons and responsible energy production.
  • The combined company will operate across approximately 425,000 net acres, with a production base of 117 thousand barrels of oil equivalent per day (117 Mboe/d, on a pro forma 1Q21 production basis).
  • The transaction is expected to be significantly accretive to free cash flow and other per-share metrics.
  • At closing, Civitas is projected to be one of most well-capitalized companies in the industry, with a leverage ratio below 0.3x pro forma 1Q21 Net Debt / 2021E EBITDA.
  • Civitas expects to achieve annual expense and capital savings of approximately $25 million.
  • Bonanza Creek's recently announced annual dividend of $1.40 per share is expected to be increased by Civitas to $1.60 per share effective at closing, with such increase representing a distribution of approximately half of the transaction synergies to Civitas' shareholder base.
  • Bonanza Creek President and Chief Executive Officer, Eric Greager, will serve as President and CEO of Civitas. Other senior leadership positions will be filled by current executives of Bonanza Creek and Extraction.
  • Extraction Chairman of the Board, Ben Dell, will serve as Chairman of Civitas, and each of Bonanza Creek and Extraction will nominate four directors to Civitas' diverse, eight-member Board.
  • Civitas will take to the next level an E&P business model that has been actively embraced by both Bonanza Creek and Extraction, defined by operational discipline, a strong balance sheet, commitment to free cash flow generation, financial alignment with stakeholders, environmental and community leadership, and best-in-class governance.
  • At closing, Civitas will be Colorado's first net-zero oil and gas producer (scope 1 and scope 2) through an intensive, continuing focus on reducing operational emissions and a multi-year investment in certified emissions offsets.

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