Civitas Resources Buys Oil Producing Assets In Midland Basin For $2.1B, Raises FY24 Outlook & More

Civitas Resources Inc CIVI penned a deal with Vencer Energy to acquire oil-producing assets in the Midland Basin of west Texas for around $2.1 billion.

The acquisition is priced at 2.8x 2024 estimated adjusted EBITDAX at $80/Bbl NYMEX WTI and $3.50/MMBtu NYMEX Henry Hub.

The buyout price comprises the issuance of about 7.3 million shares to Vencer and $1.55 billion in cash. Of this, $1 billion will be due at closing, and the remaining $550 million will be paid on January 3, 2025. 

Civitas also has the option to accelerate the deferred cash payment to transaction closing, which will decrease the total purchase price by $50 million to $2.05 billion.

The acquisition will add around 44,000 net acres in the Midland Basin and current production of about 62 Mboe/d (about 50% oil). 

The buyout is expected to close in January 2024, subject to customary closing conditions.

Also Read: Civitas Resources Forays Into Permian Basin Through ~$5B Assets Buyout

Outlook: The company projects Permian production (pro forma for the acquisition) to be about 170 Mboe/d (around 50% oil) in 2024. Including the acquisition impact, CIVI raised FY24 total production guidance to 325 – 345 Mboe/d (from 270 − 290 Mboe/d) and capital expenditure to $1,950 million − $2,250 million (from $1,600 million − $1,800 million). 

The buyout is projected to boost FCF per share by 5% in 2024, with Civitas expecting to generate around $1.8 billion of FCF in 2024.

At deal closure, Civitas projects its Net Debt/Adjusted EBITDAX leverage ratio to be about 1.1x and improve to about 0.9x in 2024. 

The company also expects to optimize its asset portfolio through non-core asset sales, including its previously announced sale of non-core assets of about $300 million in the DJ Basin by mid-2024, with proceeds used for debt reduction.

Civitas intends to fund the cash portion of the purchase price with a combination of debt and equity financings.

As of June 30, 2023, CIVI held a total liquidity of $3.7 billion, which consisted of $2.7 billion of cash plus funds available under its credit facility. 

Also Read: Civitas Has 'Meaningful' Scale To Drive FCF & Capital Return, Analyst Asserts

Price Action: CIVI shares are trading lower by 5.89% at $72.66 on the last check Wednesday.