Cimarex Energy has struck a deal to acquire Resolute Energy for US$1.6 billion including debt, broadening its asset base in the Permian Basin.
The deal will add 35,000 boepd across 21,000 net acres (85 square km) in Reeves County, Texas – an area that neighbours Cimarex’s existing assets, to the company’s production base. Cimarex’s 259,000-net acre (1,048-square km) position in the Permian’s Delaware sub basin will increase by 34% with the acquisition of Resolute.
“These assets fit us like a glove,” said Cimarex’s CEO, Thomas Jorden, in a conference call with analysts. “This is the type of deal we’ve been looking for.”
Not everybody was pleased with the deal, however. Kimmeridge Energy Management, Resolute’s largest shareholder, claimed that the sale price undervalued the company’s assets.
A Kimmeridge managing partner, Ben Dell, said that he was “pleased to see that Resolute’s management team has finally acted”, but added that the proposed price “undervalues” the Denver-based driller.
Resolute’s third-quarter financial results showed that its Permian output had jumped by over 50% to 3,197 boepd compared to the same period last year.
The Permian Basin, which continues to drive the US shale boom, has seen plenty of mergers and acquisitions (M&As) recently as buying up companies has become an increasingly popular option for those seeking to expand their footprint in the region amid a lack of land for sale.
As a mid-cap producer, Cimarex has not been known for large acquisitions. Resolute is a comparatively small player that has been under pressure from shareholders and investors, who have expressed concerns that production growth was not going to be significant enough to deliver shareholder value.
Subject to closing conditions, the transaction is expected to be completed by the end of the first quarter of 2019.