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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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