Civitas signs deals to sell certain DJ basin assets for $215 million

Civitas Resources Inc., Denver, has signed agreements to sell two asset packages covering about 82,400 net acres in the Denver-Julesburg (DJ) basin for a combined $215 million. The deals complete the company's goal, announced last June, to divest at least $300 million worth of assets.

The acres Civitas is selling are in northern Colorado and executives said they "primarily represented Civitas' long-dated future development in its northeast extension area." President and chief executive officer Chris Doyle told analysts on a conference call that the assets being sold, which have a production capacity of about 7,000 boe/d, "simply don’t compete for capital."

While Civitas didn't name the buyers of its assets late last week, one has since stepped forward: Officials with IOG Resources II LLC, an entity backed by private-equity investor First Reserve, said they had acquired working interests and royalty interests with about 4,700 boe/d in net production.

"We will continue and always look at ways to optimize our overall portfolio," Doyle said when asked on Civitas' conference call about the possibility of more asset divestitures. "But I will say that we're happy with what we've achieved and excited to get this behind us."

The sale agreements come after the fourth-quarter 2023 divestiture of $85 million worth of other DJ basin acreage and on the heels of the company’s acquisition for a little more than $2 billion of Vencer Energy LLC assets in the Midland basin (OGJ Online, Oct. 4, 2023). That acquisition completed a trio of deals that has taken Civitas into the Permian basin at scale: Earlier in the year, the company paid nearly $2.5 billion for many of Tap Rock Resources LLC’s assets as well as about $2.2 billion for the Midland basin assets of Hibernia Energy III LLC. Tap Rock and Hibernia are both portfolio companies of NGP Energy Capital Management LLC (OGJ Online, June 20, 2023)

First-quarter numbers

In the first 3 months of the year, Civitas produced net income of $176 million on operating net revenues of $1.33 billion. Those numbers had been $202 million and $656 million, respectively, in the same period of 2023, before the company made its big Permian moves.

Production in the DJ basin averaged almost 169,000 boe/d during the quarter, compared with nearly 173,000 boe/d in the last 3 months of 2023. In the Permian, the company produced an average of nearly 167,000 boe/d, up from 106,000 in fourth-quarter 2023 thanks primarily to the Vencer deal.

The total production of 336,000 boe/d lies at the midpoint of full-year guidance. The Civitas continues to expect that the Permian will draw 60% of the company’s capital spending for the year, which is now forecast to be $1.8-2.1 billion—down about $150 million due to increased productivity in the DJ basin (OGJ Online, Feb. 28, 2024)

Shares of Civitas (Ticker: CIVI) were changing hands around $76.65 in midday trading May 6, up about 1.5% from the previous Friday’s close. Over the past 6 months, shares have risen slightly, growing the company’s market capitalization to about $7.7 billion.