CIVITAS IS BUYING OIL, GAS COMPANY CRESTONE PEAK

Company reaches deal to buy Crestone Peak Resources

Civitas Resources, which formed in May after the merger of two Colorado oil and gas companies, is acquiring Denverbased Crestone Peak Resources in all-stock deal to further consolidate operations along the Front Range.

Civitas said in a statement Monday the acquisition of Crestone will result in an enterprise worth about $4.5 billion. The company will have operations over roughly a half-million acres, daily production of the equivalent of 160,000 barrels of oil and proven reserves of the equivalent of 530 million barrels of oil.

The move is more consolidation of oil and gas operations in the Denver-Julesburg Basin, the center of oil and gas production in Colorado, as companies focus on reducing debt and costs, and increasing cash flow.

In May, Denver-based Bonanza Creek Energy and Extraction Oil and Gas Inc. agreed to an allstock merger valued at $2.6 billion to create Civitas Resources.

“The benefits of in-basin consolidation are compelling, and we are pleased to become part of the dynamic enterprise that is Civitas. Crestone has long been a leader in safety and sustainability issues, and we look forward to continuing that leadership at Civitas,” said Tony Buchanon, Crestone president and CEO.

The acquisition of Crestone for $1.1 billion in equity and a total of $1.3 billion puts the company formed by Extraction and Bonanza Creek in the pole position to drive consolidation in the Denver-Julesburg Basin, said Andrew Dittmar, senior mergers and acquisitions analyst with Enverus.

Dittmar said in an email the Crestone deal is driven more by adding future drilling sites than the Bonanza Creek-Extraction merger was.

“In particular, Crestone’s southern position located east of Denver largely in Arapahoe County strongly complements Civitas’ existing assets and is an area that’s largely undeveloped with compelling opportunities,” Dittmar said.

Civitas said the integration of Crestone is expected to generate approximately $45 million in savings annually and $575 million in free cash flow in 2022. The company expects to increase shareholders’ annual dividend to $1.85 per share from the previously announced $1.60.

Crestone formed in 2016 and acquired Encana Corp.’s oil and gas properties in the DenverJulesburg Basin to Crestone Peak. Crestone’s primary shareholder is the Canada Pension Plan Investment Board, which will become Civitas’ largest shareholder upon closing,

Bonanza Creek’s operations were concentrated in the rural portions of the Wattenberg Field in the D-J Basin. Extraction has tended to operate in some of the fastest-growing areas along the Front Range.

Extraction emerged from Chapter 11 bankruptcy in January.

The Crestone transaction, which is expected to close immediately following the Bonanza CreekExtraction merger in the fall of 2021, has been unanimously approved by the boards of directors of Bonanza

Creek, Extraction and Crestone and fully approved by Crestone’s shareholders.