Page 5 - NorthAmOil Week 23 2021

NorthAmOil COMMENTARY NorthAmOil

revealed, will now be inclusive of the Crestone company’s chairman – telling analysts during a
acquisition. conference call this week that it would pursue
The two deals are set to close in quick succes- even larger deals.
sion in the autumn of 2021. While they are part “With increased firepower, we can add a zero
of a broader, US-wide consolidation trend, they to the size of transactions that we have been exe-
may also be advantageous given stricter regula- cuting on,” said Goff, who is Contango’s largest
tory restrictions on oil and gas drilling in Col- shareholder. With combined adjusted 2022
orado. Those companies with larger footprints earnings of around $800mn, the combined
in the state may find it easier to move forward entity will be “massively larger” than Contango
with new drilling in more remote areas. Smaller is, he added.
producers, meanwhile, could find themselves The companies see attractive acquisition
more restricted if their acreage is located close opportunities among both large-cap independ-
to communities where the impact of oil and gas ent and small sub-scale public firms, as well as
operations now needs to be taken into consid- among private players that are seeking liquidity,
eration by regulators. executives said.
Given the size of Civitas once both its transac- The deal comes after Contango has completed
tions close, it should have a comparatively wide four acquisitions in the last 18 months, includ- The focus
variety of options. ing a deal to buy assets in the Big Horn, Permian
and Powder River basins via a bank-owned liq- of the new
Pursuing consolidation uidation of assets in November 2020. company that
Meanwhile, the all-stock merger between Inde- Shareholders of KKR’s Independence will
pendence and Contango will create an oil and own about 76% of the merged entity, with Independence
gas company with an enterprise value of about Contango shareholders holding the remaining
$5.7bn including debt. 24% upon closing of the deal, which is targeted and Contango
Both companies said their portfolios consist for the third quarter or early fourth quarter of
of low-decline producing US assets. In Inde- 2021. will create
pendent’s case, these assets are located across The transaction is also notable, as it marks alone illustrates
the Eagle Ford, Rockies, Permian Basin and KKR – a private equity firm – bucking the trend
Mid-Continent regions, while Contango oper- of exiting oil and gas that has played out among that further
ates primarily in the Mid-Continent, Permian its peers recently.
and Rockies areas. The focus of the new company that Independ- acquisitions are
KKR Energy Real Assets head, David ence and Contango will create alone illustrates
Rockecharlie, who will serve as the merged enti- that further acquisitions are likely. However, likely.
ty’s CEO, said the Eagle Ford shale would be the these companies are not the only ones pursuing
largest basin for the new company. new opportunities to consolidate, and given that
The combined entity will focus on further the pace of M&A activity appears to be picking
consolidation, with Contango’s chairman, up, more deals could be announced sooner
John Goff – who is also set to become the new rather than later.™

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