(Reuters) -Bonanza Creek Energy and Extraction Oil & Gas said on Monday they will combine in an $1.1 billion all-stock merger of equals to create one of Colorado’s largest oil and gas drillers.
Deal-making in the oil and gas sector has had a record start this year, with companies taking advantage of improved oil price expectations as global fuel demand picks up from pandemic lows.
The combined company, Civitas Resources Inc, will be the largest pure-play oil and gas company in the Denver-Julesburg Basin in Colorado and will operate on about 425,000 net acres, with a production base of 117,000 barrels of oil equivalent per day.
The deal comes on the heels of natural gas producer EQT Corp’s acquisition of Appalachian basin rival Alta Resources last week and Pioneer Natural Resources $6.4 billion buyout of privately-held rival DoublePoint Energy last month. [reut.rs/3txFs3F]
Shareholders of Extraction will receive 1.1711 shares of Bonanza Creek for each share of Extraction, representing a less than 1% premium. [[https:/refini.tv/3vOoyzg]]
The deal, with an enterprise value of about $2.6 billion, is expected to add to free cash flow and other per-share metrics, with annual expense and capital savings of about $25 million.
Bonanza Creek’s $1.40 per share dividend is expected to be increased by Civitas to $1.60 per share after the deal closes.
Bonanza and Extraction shareholders will own 50% each of the new company. The deal is expected to close in the third quarter of 2021.
The Wall Street Journal first reported the deal talks on Monday, citing sources familiar with the matter.
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