DENVER, May 10, 2021 /PRNewswire/ -- Bonanza Creek
Energy, Inc. (NYSE: BCEI) ("Bonanza Creek") and Extraction Oil
& Gas, Inc. (NASDAQ: XOG) ("Extraction"), today announced that
they have entered into a definitive agreement to combine in an
all-stock merger of equals. The combined company, to be named
Civitas Resources, Inc. ("Civitas"), will be the largest pure-play
energy producer in Colorado's
Denver-Julesburg (DJ) Basin, with an aggregate
enterprise value of approximately $2.6
billion (based on the closing share prices of Bonanza Creek
and Extraction on May 7, 2021).
TRANSACTION HIGHLIGHTS
- The merger will create a leading energy producer in
Colorado's DJ Basin, a basin
characterized by low operating costs, extensive infrastructure,
ample takeaway, multiple producing horizons and responsible energy
production.
- The combined company will operate across approximately 425,000
net acres, with a production base of 117 thousand barrels of oil
equivalent per day (117 Mboe/d, on a pro forma 1Q21 production
basis).
- The transaction is expected to be significantly accretive to
free cash flow and other per-share metrics.
- At closing, Civitas is projected to be one of most
well-capitalized companies in the industry, with a leverage ratio
below 0.3x pro forma 1Q21 Net Debt / 2021E EBITDA.
- Civitas expects to achieve annual expense and capital savings
of approximately $25 million.
- Bonanza Creek's recently announced annual dividend of
$1.40 per share is expected to be
increased by Civitas to $1.60 per
share effective at closing, with such increase representing a
distribution of approximately half of the transaction synergies to
Civitas' shareholder base.
- Bonanza Creek President and Chief Executive Officer,
Eric Greager, will serve as
President and CEO of Civitas. Other senior leadership positions
will be filled by current executives of Bonanza Creek and
Extraction.
- Extraction Chairman of the Board, Ben
Dell, will serve as Chairman of Civitas, and each of Bonanza
Creek and Extraction will nominate four directors to Civitas'
diverse, eight-member Board.
- Civitas will take to the next level an E&P business model
that has been actively embraced by both Bonanza Creek and
Extraction, defined by operational discipline, a strong balance
sheet, commitment to free cash flow generation, financial alignment
with stakeholders, environmental and community leadership, and
best-in-class governance.
- At closing, Civitas will be Colorado's first net-zero oil and gas producer
(scope 1 and scope 2) through an intensive, continuing focus on
reducing operational emissions and a multi-year investment in
certified emissions offsets.
CEO COMMENTARY
"Successful E&P operators will be those who place a priority
on disciplined capital deployment, deliver operational and cost
excellence, maintain a relentless focus on shareholder value, and
have governance standards that are aligned with the times," said
Eric Greager, President and Chief
Executive Officer of Bonanza Creek. "Bonanza Creek and Extraction
each bring a demonstrated commitment to these principles, as well
as shared organizational and community values. Together, as
Civitas, we will embody an E&P business model ideally suited to
deliver for all of our stakeholders."
"We believe the combination of Bonanza Creek and Extraction will
create one of the most durable, profitable, and progressive
producers in the DJ Basin, with premium assets at the front end of
the cost curve," said Tom Tyree,
Chief Executive Officer of Extraction. "Collectively, we will
create significant value for all stakeholders as we will become
Colorado's first net-zero oil and
gas producer through the continuing reduction in operational
emissions coupled with a multi-year investment in certified
emissions offsets."
TRANSACTION DETAILS
Under the terms of the definitive merger agreement, Extraction
shareholders will receive a fixed exchange ratio of 1.1711 shares
of Bonanza Creek common shares for each share of Extraction common
stock owned on the closing date. Based on the exchange ratio and
the closing price of Bonanza Creek's common stock on May 7, 2021, Civitas would have an aggregate
enterprise value of approximately $2.6
billion. Upon completion of the transaction, Bonanza Creek
and Extraction shareholders will each own approximately 50.0% of
Civitas, both on a fully diluted basis.
The transaction, which is expected to close in the third quarter
of 2021, has been unanimously approved by the boards of directors
of both companies. Funds managed by Kimmeridge Energy own
approximately 38% percent of the outstanding shares of Extraction
and have entered into a support agreement to vote in favor of the
transaction. The closing of the merger is subject to customary
closing conditions, including approvals by Bonanza Creek and
Extraction shareholders.
STRATEGIC RATIONALE
- Enhanced scale and geographic breadth – Civitas will be
the largest pure-play energy producer in the DJ Basin with current
production of 117 thousand barrels of oil equivalent per day (117
Mboe/d) and approximately 425,000 net acres. These operations are
geographically diversified across rural, less regulatory-intensive
areas, as well as more prospective suburban acreage.
- Significant corporate synergies further reduce
basin-leading cost structures – The combined company expects to
generate approximately $25 million in
annual corporate synergies, including general and administrative
savings, LOE efficiencies, and reduced capital costs. The merger of
equals structure allows shareholders of both Bonanza Creek and
Extraction to benefit from the cost synergies and significant
upside potential of the combined company.
- Acceleration of cash returns to shareholders – Civitas
represents the next level of an E&P business model that has
been actively embraced by both Bonanza Creek and Extraction, and is
defined by capital discipline, low cost structure, and a strong
balance sheet to maximize free cash flow and accelerate the
distribution of a material portion of this cash to shareholders.
Disciplined reinvestment rates are expected to yield flat to low
production growth in the coming years and generate sufficient free
cash flow to support material dividends going forward. Bonanza
Creek's recently announced annual dividend of $1.40 per share is expected to be increased by
Civitas to $1.60 per share effective
at closing, with such increase representing a distribution of
approximately half of the transaction synergies to Civitas'
shareholder base.
- Strong balance sheet and liquidity – The all-stock
transaction ensures Civitas will retain a strong balance sheet,
with a leverage ratio below 0.3x pro forma 1Q21 Net Debt / 2021E
EBITDA, at the time of closing, and Civitas will target leverage of
approximately 0.5x over the longer term. Civitas will also have
significant liquidity. As of April 1,
2021, Bonanza Creek and Extraction had combined cash on hand
of $127 million and combined undrawn
capacity under their credit facilities of $651 million. The resulting enhanced credit
profile is expected to broaden the combined company's access to the
capital markets and reduce its overall cost of capital.
- Advances consolidation strategy – Civitas represents a
major step in Bonanza Creek's and Extraction's consolidation
strategies, which have been pursued in conjunction with the
companies' continuing initiatives to reduce unit costs, expand
margins, enhance returns, increase financial strength, and grow
cash distributions to shareholders. Civitas will be positioned to
be the preferred consolidation partner for additional transactions
in the DJ Basin, helping to increase its trading liquidity and
market relevance, and ultimately to elevate its presence among the
top energy producers in the country.
- Industry-leading commitment to ESG excellence and
values – Civitas will expand on the ESG initiatives
pursued by both Bonanza Creek and Extraction, including its
commitment to become Colorado's
first net-zero oil and gas producer at closing, through continuing
reduction in operational emissions coupled with a multi-year
investment in certified emissions offsets. Civitas will pursue
additional sustainability objectives including the adoption of an
electric vehicle (EV) fleet; installation of EV charging stations
in its communities; air monitoring and certification through
leading organizations such as Project Canary and pursuit of the
Responsibly Sourced Gas certification for its natural gas
production; the development of community solar facilities; and the
financing of a community fund to sponsor local project grants and
scholarships. Upon close, Civitas will provide a progressive
framework for achieving its ESG targets, which it believes will
address the interests of its operating partners, employees, service
providers, and the communities in which the combined company
operates.
GOVERNANCE AND LEADERSHIP
Following the merger, the Civitas board of directors will
consist of eight members, four directors from Bonanza Creek and
four from Extraction. Extraction's current Chairman, Ben Dell, will be Chairman of the Board, and
Bonanza Creek's current President and Chief Executive Officer will
be President and CEO of Civitas. The combined company's executive
team will include demonstrated leaders from each of Bonanza Creek
and Extraction, including: Matt
Owens as EVP and COO, Marianella
Foschi as EVP and CFO, Skip
Marter as EVP and General Counsel, Sandi Garbiso as SVP and CAO, and Brian Cain as VP of External Affairs and ESG
Policy. Civitas will be headquartered in Denver.
ADVISORS
J.P. Morgan Securities LLC is serving as financial advisor and
Vinson & Elkins LLP is serving as legal advisor to Bonanza
Creek. Petrie Partners Securities, LLC is serving as financial
advisor and Kirkland & Ellis LLP is serving as legal advisor to
Extraction.
CONFERENCE CALL
WEBCAST AND ADDITIONAL MATERIALS
Bonanza Creek and Extraction will discuss the transaction on a
conference call today at 7:00a.m. Mountain
Time (9:00a.m. Eastern Time).
Institutional investors and analysts are invited to participate in
the call by dialing (844) 229-9561, or (574) 990-0802 for
international calls, using conference ID: 6869513. Other interested
parties, including individual investors, members of the media and
employees of Bonanza Creek and Extraction, are encouraged to
participate via webcast. The webcast, and an accompanying investor
presentation, may be accessed from each of the company's respective
investor relations pages:
https://ir.bonanzacrk.com/investor-overview and
https://ir.extractionog.com. A replay of the call will be posted on
the investor relations section of each company's homepage.
Given this merger transaction and the residual fresh start
accounting requirements associated with Extraction's recent
emergence from Chapter 11, Extraction will be delaying its earnings
announcement to May 24, 2021.
ABOUT THE COMPANIES
Bonanza Creek is an independent oil and natural gas company
engaged in the acquisition, exploration, development, and
production of oil and associated liquids-rich natural gas in the
Rocky Mountain region of the United
States. The Company's assets and operations are concentrated
in rural, unincorporated Weld County,
Colorado, within the DJ Basin, focused on the Niobrara and
Codell formations. The Company's common shares are listed for
trading on the NYSE under the symbol: "BCEI". For more information
about the Company, please visit www.bonanzacrk.com.
Extraction is a Denver-based independent energy
company differentiated by its financial, operational and governance
model. The Company is focused on developing and producing crude
oil, natural gas and NGLs in the Denver-Julesburg
Basin of Colorado. Extraction's common shares are listed
for trading on NASDAQ under the symbol XOG. For more information,
please visit www.extractionog.com.
Investor Contacts:
Bonanza Creek
Scott Landreth
slandreth@bonanzacrk.com
Extraction
John
Wren
ir@extractionog.com
Media Contacts:
Brian Cain
info@extractionog.com
Daniel Yunger
Kekst CNC
kekst-extraction@kekstcnc.com
No Offer or Solicitation
Communications in this news release do not constitute an offer
to sell or the solicitation of an offer to subscribe for or buy any
securities or a solicitation of any vote or approval with respect
to the proposed transaction or otherwise, nor shall there be any
sale, issuance or transfer of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such
jurisdiction.
Additional Information for Shareholders
In connection with the proposed transaction, Bonanza Creek and
Extraction intend to file materials with the Securities and
Exchange Commission ("SEC"), including a Registration Statement on
Form S-4 of Bonanza Creek (the "Registration Statement") that will
include a joint proxy statement/prospectus of Bonanza Creek and
Extraction. After the Registration Statement is declared effective
by the SEC, Bonanza Creek and Extraction intend to mail a
definitive proxy statement/prospectus to the shareholders of
Bonanza Creek and the shareholders of Extraction. This news release
is not a substitute for the joint proxy statement/prospectus or the
Registration Statement or for any other document that Bonanza Creek
or Extraction may file with the SEC and send to Bonanza Creek's
shareholders and/or Extraction's shareholders in connection with
the proposed transaction. INVESTORS AND SECURITY HOLDERS OF BONANZA
CREEK AND EXTRACTION ARE URGED TO CAREFULLY AND THOROUGHLY READ THE
JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT/PROSPECTUS, AS
EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER
RELEVANT DOCUMENTS FILED BY BONANZA CREEK AND EXTRACTION WITH THE
SEC, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT BONANZA CREEK, EXTRACTION, THE PROPOSED
TRANSACTION, THE RISKS RELATED THERETO AND RELATED MATTERS.
Investors will be able to obtain free copies of the Registration
Statement and joint proxy statement/prospectus, as each may be
amended from time to time, and other relevant documents filed by
Bonanza Creek and Extraction with the SEC (when they become
available) through the website maintained by the SEC
at www.sec.gov. Copies of documents filed with the SEC by
Extraction will be available free of charge from Extraction's
website at www.extractionog.com under the "Investors" tab or
by contacting Extraction's Investor Relations Department at
ir@extractionog.com. Copies of documents filed with the SEC by
Bonanza Creek will be available free of charge from Bonanza Creek's
website at www.bonanzacrk.com under the "Investor Relations"
tab or by contacting Bonanza Creek's Investor Relations Department
at slandreth@bonanzacrk.com.
Participants in the Proxy Solicitation
Bonanza Creek, Extraction and their respective directors and
certain of their executive officers and other members of management
and employees may be deemed, under SEC rules, to be participants in
the solicitation of proxies from Extraction's shareholders and
Bonanza Creek's shareholders in connection with the proposed
transaction. Information regarding the executive officers and
directors of Bonanza Creek is included in its definitive proxy
statement for its 2021 annual meeting filed with the SEC on
April 24, 2021. Information regarding
the executive officers and directors of Extraction is included in
its Form 10-K/A filed with the SEC on April
30, 2021. Additional information regarding the persons who
may be deemed participants and their direct and indirect interests,
by security holdings or otherwise, will be set forth in the
Registration Statement and joint proxy statement/prospectus and
other materials when they are filed with the SEC in connection with
the proposed transaction. Free copies of these documents may be
obtained as described in the paragraphs above.
Cautionary Statement Regarding Forward-Looking
Information
Certain statements in this news release concerning the proposed
transaction, including any statements regarding the expected
timetable for completing the proposed transaction, the results,
effects, benefits and synergies of the proposed transaction, future
opportunities for the combined company, future financial
performance and condition, guidance and any other statements
regarding Bonanza Creek's or Extractions future expectations,
beliefs, plans, objectives, financial conditions, assumptions or
future events or performance that are not historical facts are
"forward-looking" statements based on assumptions currently
believed to be valid. Forward-looking statements are all statements
other than statements of historical facts. The words "anticipate,"
"believe," "ensure," "expect," "if," "intend," "estimate,"
"probable," "project," "forecasts," "predict," "outlook," "aim,"
"will," "could," "should," "would," "potential," "may," "might,"
"anticipate," "likely" "plan," "positioned," "strategy," and
similar expressions or other words of similar meaning, and the
negatives thereof, are intended to identify forward-looking
statements. Specific forward-looking statements include statements
regarding Extraction and Bonanza Creek's plans and expectations
with respect to the proposed transaction and the anticipated impact
of the proposed transaction on the combined company's results of
operations, financial position, growth opportunities and
competitive position. The forward-looking statements are intended
to be subject to the safe harbor provided by Section 27A of the
Securities Act of 1933, Section 21E of the Securities Exchange Act
of 1934 and the Private Securities Litigation Reform Act of
1995.
These forward-looking statements involve significant risks and
uncertainties that could cause actual results to differ materially
from those anticipated, including, but not limited to, the
possibility that shareholders of Bonanza Creek and Extraction may
not approve the merger agreement; the risk that a condition to
closing of the proposed transaction may not be satisfied, that
either party may terminate the merger agreement or that the closing
of the proposed transaction might be delayed or not occur at all;
potential adverse reactions or changes to business or employee
relationships, including those resulting from the announcement or
completion of the transaction; the diversion of management time on
transaction-related issues; the ultimate timing, outcome and
results of integrating the operations of Bonanza Creek and
Extraction; the effects of the business combination of Bonanza
Creek and Extraction, including the combined company's future
financial condition, results of operations, strategy and plans; the
ability of the combined company to realize anticipated synergies in
the timeframe expected or at all; changes in capital markets and
the ability of the combined company to finance operations in the
manner expected; regulatory approval of the transaction; the
effects of commodity prices; the risks of oil and gas activities;
and the fact that operating costs and business disruption may be
greater than expected following the public announcement or
consummation of the proposed transaction. Expectations regarding
business outlook, including changes in revenue, pricing, capital
expenditures, cash flow generation, strategies for our operations,
oil and natural gas market conditions, legal, economic and
regulatory conditions, and environmental matters are only forecasts
regarding these matters.
Additional factors that could cause results to differ materially
from those described above can be found in Bonanza Creek's Annual
Report on Form 10-K for the year ended December 31, 2020 and in its subsequently filed
Quarterly Reports on Form 10-Q, each of which is on file with the
SEC and available from Bonanza Creek's website at
www.bonanzacrk.com under the "Investor Relations" tab, and in other
documents Bonanza Creek files with the SEC; and in Extraction's
Annual Report on Form 10-K for the year ended December 31, 2020 and in its subsequently filed
Quarterly Reports on Form 10-Q, each of which is on file with the
SEC and available from Extraction's website
at www.extractionog.com under the "Investors" tab, and in
other documents Extraction files with the SEC.
All forward-looking statements speak only as of the date they
are made and are based on information available at that time.
Neither Bonanza Creek nor Extraction assumes any obligation to
update forward-looking statements to reflect circumstances or
events that occur after the date the forward-looking statements
were made or to reflect the occurrence of unanticipated events
except as required by federal securities laws. As forward-looking
statements involve significant risks and uncertainties, caution
should be exercised against placing undue reliance on such
statements.
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SOURCE Bonanza Creek Energy, Inc.; Extraction Oil & Gas,
Inc.