NorthAmOil: Civitas to enter Permian by buying $4.7bn worth of assets

Civitas Resources announced on June 20 that it had signed two definitive agreements to acquire oil-producing assets worth a combined $4.7bn in the Permian Basin. The agreements were signed with affiliates of Hibernia Energy III and Tap Rock Resources, both of which are portfolio companies of funds managed by NGP Energy Capital Management.

The acquisitions will mark Civitas’ entry into the Permian, after previously operating only in Colorado’s Denver-Julesburg (DJ) Basin. They will also boost the company’s production by roughly 100,000 barrels of oil equivalent per day, or 60%. After the transaction closes, anticipated on August 1, output from the assets is expected to average 105,000 boepd until the end of 2023.

The assets being acquired consist of 68,000 net acres (275 square km), 90% held-by-production, spanning both the Delaware and Midland sub-basins of the Permian. Proven reserves associated with the assets are estimated at 335mn boe, and oil accounts for around 54% of current production from the properties.

Civitas’ strategy appears to be in line with that of a number of shale producers, with a focus on returns and debt reduction. The company expects the acquisitions to boost its 2024 free cash flow per share by 35% to roughly $1.1bn. It said it anticipated raising its dividend by around 20% in 2024. However, it has scaled back its planned share repurchases up to the end of 2024 from $1bn to $500mn in an effort to accelerate debt reduction.

The company is also planning to sell around $300mn worth of non-core assets by mid-2024.