Civitas adds Permian basin assets in $2.1-billion deal with Vencer Energy

Civitas Resources Inc., Denver, agreed to acquire oil producing assets in the Midland basin in Texas from Vencer Energy LLC, the upstream arm of trader Vitol, in a cash and stock deal valued at $2.15 billion. In a release Oct. 4, Civitas said the deal increases its Permian basin scale and balances the portfolio between premium Permian basin and Denver-Julesburg (DJ) basin positions.

Civitas entered the Permian basin earlier this year through separate agreements with affiliates of Hibernia Energy III LLC and Tap Rock Resources LLC (OGJ Online, June 20, 2023).

The deal with Vencer will add about 44,000 net acres in the Midland basin across five counties with current production of about 62,000 boe/d (50% oil). Pro forma for the acquisition, Civitas’ 2024 estimated Permian basin production is expected to be about 170,000 boe/d (50% oil).

With the deal, Civitas would gain an estimated 400 gross development locations primarily in the Spraberry and Wolfcamp formations. Some 40% of the new locations have an estimated IRR of more than 40% at $70/bbl WTI, according to the operator. At closing, expected in January 2024, Civitas expects to hold more than 1,200 high-quality oil development locations in the Permian basin.

Vencer is currently running three rigs on the Midland basin assets and Civitas expects to reduce the rig count to two in 2024, said Jefferies analysts in an equity research note Oct. 4. In 2024, Civitas expects to run four rigs in Midland basin, two in Delaware basin, and two in DJ basin. Further, Jefferies said, based on Civitas guidance, it expects the operator to maintain its 149 gross well pace in the DJ-basin and complete 97 wells in Midland basin and 46 wells in Delaware basin.

Vencer Energy acquired the assets from Hunt Oil Co. in 2021 (OGJ Online, May 3, 2021). Financial terms of that deal were not disclosed.

With the announcement, Civitas said it intends to move forward with non-core asset sales, including a previously announced plan to sell about $300 million in non-core assets in the DJ basin by mid-2024.

The deal price consists of about 7.3 million shares of common stock to be issued to Vencer and $1.55 billion of cash, of which $1 billion will be due at closing. The remaining $550 million will be payable on Jan. 3, 2025. Civitas has the option to accelerate the deferred cash payment to closing, which would lower the total purchase price by $50 million to $2.05 billion, the company said.

With the added assets, Civitas expects its 2024 total company production will be 325,000–345,000 boe/d and total capital expenditures will be $1.95–2.25 billion.