Page 4 - NorthAmOil Week 23 2021

NorthAmOil COMMENTARY NorthAmOil

Consolidation wave shows

no signs of slowing

The wave of consolidation sweeping the US oil and gas industry shows

no sign of slowing, with yet more new deals announced in recent days

US THE wave of consolidation that has been sweep- Rocking the DJ
ing the US oil and gas industry since last year The merger between Bonanza Creek and Extrac-
WHAT: shows no sign of slowing, with yet more major tion, announced in May, is already set to create
More major mergers and new deals announced in recent days. Civitas the largest exploration and production company
acquisitions have been Resources, which itself is currently in the process focused on Colorado’s Denver-Julesburg (DJ)
announced in the US of being formed through the merger of Bonanza Basin. Now, the addition of Crestone through
oil and gas industry in Creek Energy and Extraction Oil & Gas, agreed an all-stock deal will turn Civitas into a DJ Basin
recent days. this week to acquire Crestone Peak Resources. player worth around $4.5bn.
Separately, KKR & Co.’s Independence Energy Sources familiar with the matter told Reuters
WHY: announced that it had agreed to merge with that the latest deal values Crestone, which was
Producers are Contango Oil & Gas. formed in 2016 when the Canada Pension Plan
increasingly pursuing This follows a handful of similarly large merg- Investment Board (CPPIB) and the Broe Group
scale combined with ers and acquisitions (M&As) among US shale acquired assets from Encana, at around $1.3bn
restrained spending on players in recent weeks and months. Notably, at including debt.
new drilling. the start of June, Southwestern Energy agreed Once both transactions have closed, Civitas
to buy Indigo Natural Resources for roughly expects to be “optimally positioned to increase
WHAT NEXT: $2.7bn, while Cabot Oil & Gas struck a deal to efficiencies through combining operations”
Further deals are likely merge with Cimarex Energy to create a $17bn across more than 500,000 net acres (2,023
to follow. company in late May. These were just some of square km) with an estimated production base
the other recent examples of a trend that has of 160,000 barrels of oil equivalent per day
been playing out since the second half of 2020. (boepd).
The flurry of deals comes as producers are Bonanza Creek and Extraction both say they
increasingly turning to scale to help drive their have committed to a strategy that prioritises
performance – though in some cases, such as operational discipline, a strong balance sheet
the Southwestern-Indigo deal, they are also and commitment to free cash flow (FCF) gen-
seeking to expand into new regions. eration, among other factors, ahead of Civitas’
And while the consolidation trend began to creation. They also intend for Civitas to be Col-
play out during a particularly challenging time orado’s first carbon-neutral oil and gas producer
for the oil and gas industry, it now seems that it – in terms of Scope 1 and Scope 2 emissions.
is being bolstered by stronger commodity prices This plan, already set out when the merger
and a more favourable operating environment. between Bonanza Creek and Extraction was

Some of the latest deals
are taking place outside
of the Permian Basin,
in regions such as
Colorado’s DJ Basin.

P4 www. NEWSBASE .com Week 23 10•June•2021