Page 4 - NorthAmOil Week 21 2022

NorthAmOil COMMENTARY NorthAmOil

Centennial, Colgate in largest

shale merger of 2022

Centennial Resource Development and Colgate Energy Partners III have

agreed to combine in the largest shale merger of the year to date

PERMIAN BASIN CENTENNIAL Resource Development and In its announcement, Centennial talked up
Colgate Energy Partners III announced on May the fact that the transaction would help the
WHAT: 19 that they had agreed to combine in what the companies build scale. The merged entity will
Centennial and Colgate companies described as a merger of equals. The own around 180,000 net leasehold acres (728
have agreed to merge in news shows that the wave of mergers and acqui- square km) and 40,000 net royalty acres (162
the largest shale deal of sitions (M&As) that has been sweeping the shale square km) and will have combined production
the year so far. industry since the second half of 2020 has not yet of roughly 135,000 barrels of oil equivalent per
come to an end. Indeed, the deal is the largest of day (boepd).
WHY: the year so far for the shale industry, suggesting For Centennial, this represents a more than
The trend of shale that there is still potential for a few more major doubling of output and acreage. Additionally,
drillers using mergers transactions. the companies said on a conference call that
and acquisitions to build The merger comes as shale producers con- they would ramp up production at least some-
scale is ongoing, despite tinue to pursue scale while remaining relatively what, raising it to around 145,000 boepd by the
slowing recently. disciplined on new capital expenditures and fourth quarter of 2022 and to roughly 160,000
drilling, preferring instead to keep prioritising boepd by the same quarter of 2023.
WHAT NEXT: returns to shareholders. This is despite the fact Notably, both Colgate and Centennial has
The combined company that oil prices have risen to multi-year highs and been among the companies adding rigs to their
will be the largest remain above $110 per barrel, making produc- drilling programmes recently, according to
pure-play operator in tion considerably more profitable than it had energy data and analytics firm Enverus. Col-
the Permian Basin’s been in some time. gate is reported to have added two rigs earlier in
Delaware sub-basin. May, bringing its total to seven, while Centen-
Major merger nial added one rig for a total of three. However,
The $7.0bn transaction values Colgate at roughly the companies said they planned to reduce the
$3.9bn and consists of 269.3mn shares of Cen- combined entity’s rig count while maintaining
tennial stock, $525mn in cash and the assump- its production growth rate thanks to operational
tion of around $1.4bn of Colgate’s outstanding efficiency improvements that merging will allow
net debt. The combined company will become them to make.
the biggest pure-play operator in the Permian Centennial said the combined company
Basin’s Delaware sub-basin. planned to “leverage its high-quality, scaled

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