Colorado Springs, Colorado 2021-05-10 17:26:55 –
As a sign of continued pressure to consolidate the drilling operations, two Colorado medium-sized oil and gas companies announced a reverse stock split on Monday, setting up a new company worth $ 2.6 billion.
Bonanza Creek Energy and Extraction Oil & Gas said they would combine them to create Civitas Resources, managing 425,000 acres of leases in nine counties, primarily in the Denver-Julsberg basin, which stretches from the Denver metro area to the Wyoming border.
“DJ integration is inevitable,” Bonanza Creek CEO Eric Grieger told financial analysts in a conference call. Greeger will be the CEO of Civitas.
As long as oil and gas prices recover from 2020 lows are stable, Greagr said he will focus on better reserves in densely populated suburban corridors with active extraction.
Andrew Forkes-Gudmunson, Deputy Director of the Oil and Gas Impact Colorado Federation (LOGIC), a grassroots non-profit organization, said:
As part of the merger, Civitas executives said the company has promised to become the first Colorado operator with zero net emissions and to carry out ongoing air monitoring at its site. Achieving net zero emissions comes from a combination of emission reductions in the Civitas business and the purchase of certified emission offsets.
“Offsets don’t help residents who are drilling oil and gas,” Forks-Gadmanson said.
The two companies will drill oil and gas-rich shale formations found in many other states, including Texas, North Dakota, and Pennsylvania. During the “shale boom” that began in 2014, many operators borrowed heavily to increase production. By 2019, the United States would be the world’s largest oil producer, producing 13 million barrels per day.
However, the shade thriller used red ink and did not return cash and dividends to investors. In 2020, the combination of a plunge in oil prices and a COVID-19 pandemic caused a surge in bankruptcies and mergers across shale fields across the country.
“Integration isn’t unique to DJs, but DJs are ripe for integration,” said Matthew Haggerty, an industry analyst at BTU Analytics.
In April, Bonanza Creek completed the $ 376 million acquisition of another bankrupt Colorado excavator, HighPoint Resources.
In June, Extraction also filed for Chapter 11 Bankruptcy Reorganization that occurred in January.
“Extraction was a natural candidate for integration in the DJ Basin after its emergence from Chapter 11,” said Andrew Dittmar, M & A analyst at Enverus.
Diitmar says the fact that Extraction was able to reduce some debt during bankruptcy proceedings was one of the reasons that made Extraction attractive.
“We expect this business to become a cash flow machine … we will return a meaningful amount of that cash to our shareholders,” Grieger told financial analysts.
Bonanza Creek’s acreage is primarily on the eastern side of the DJ Basin, more rural. Extracted holdings are in urban and suburban corridors on the western side of the basin. The corridor is densely populated, but Greager states that it has higher quality reservoir rock.
Civitas said it would require independent certification for facility engineering and responsibly procured gas to reduce its environmental impact, in addition to its commitment to being a net zero emission operator. It will also convert the vehicle into an electric vehicle.
“There was a push from investors to the environment, and operators doubled the environment quarterly, especially after (Joe) Biden was elected,” Hagerty said. “I still don’t know what that means.”
Under the terms of the agreement, Bonanza Creek and Extract shareholders will redeem shares in Civitas, giving each side 50% of the new company.
Not many listed companies have been left in the DJ basin for acquisition, according to Dittmer, but they still need to acquire private sector and oil and gas territory.
“The new Civitas Resources are in the driver’s seat of this type of integration,” said Dittmar.
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Two Colorado oil companies announce merger, the latest in a consolidating industry Source link Two Colorado oil companies announce merger, the latest in a consolidating industry