Civitas Resources Inc., Denver, agreed to acquire oil producing assets in the Midland and Delaware basins of west Texas and New Mexico. Two separate agreements were signed with affiliates of Hibernia Energy III LLC and Tap Rock Resources LLC, portfolio companies of NGP Energy Capital Management LLC, for about $4.7 billion.
With the deals, Civitas enters the Permian basin and becomes a more balanced company with an inventory of opportunities in the Permian and Denver-Julesburg basins, the company said in a release June 20.
The combined transactions will add about 68,000 net acres (90% held-by-production) in the Midland and Delaware basins and will add combined proved reserves of about 335 MMboe, as of yearend 2022, Civitas said.
The deals will increase Civitas’ existing production by 60%, adding some 100,000 boe/d (54% oil) of current production with the acquired assets expected to average about 105,000 boe/d from deal closing through yearend 2023.
Combined, the deals add about 800 gross locations with some two-thirds having an estimated IRR of more than 40% at $70/bbl WTI and $3.50/MMbtu Henry Hub NYMEX pricing, the operator said. The company’s pro forma oil-weighting is expected to increase to nearly 50%.
Delaware basin
Civitas agreed to purchase a portion of Tap Rock’s Delaware basin assets in a cash and stock deal worth $2.45 billion. Tap Rock will retain ownership of the Olympus development area.
The assets include about 30,000 net acres, primarily in Eddy and Lea Counties, New Mexico. First-quarter 2023 average production was 59,000 boe/d, 52% oil. Civitas will hold about 350 locations in the Delaware basin.
The assets include an estimated 295 drillable locations with greater than 40% IRR at $70 oil, Seaport Research Partners said in an investor note June 20. “With 4 rigs currently running we expect that is over 4 years of identified inventory, though we expect the company to operate closer to 1-2 rigs going forward in the Delaware basin,” the analysts said.
Midland basin
Civitas has also agreed to purchase Hibernia’s Midland basin assets for $2.25 billion in cash. The assets include about 38,000 net acres in Upton and Reagan Counties, Texas. First-quarter 2023 average production was 41,000 boe/d, 56% oil. Civitas will hold about 450 locations on a contiguous acreage position.
The company estimates it has 185 drillable locations with greater than 40% IRR at $70 oil, Seaport Research Partners said. “With 3 rigs currently running, we expect that is over 3 years of identified inventory, though we expect the company to operate closer to a steady state of activity at 1-2 rigs in the Midland basin,” the analysts said.
