Civitas Resources, a DJ Basin Pure-Player Operator, Announced a Deal to Acquire Tap Rock and Hibernia Assets in the Delaware and Midland Basins.
On the 20th of June, Civitas Resources announced an agreement to acquire oil-producing assets of Hibernia and Tap Rock in the Midland and Delaware Basins for $4.7 billion, almost doubling the company’s market cap. Tap Rock will retain its ownership of the Olympus development area. Both companies were portfolio companies of NGP Energy Capital Management. Before the transaction announcement, Civitas Resources was a pure player in the Denver-Julesburg (DJ) Basin, producing approximately 167,000 boepd split almost equally between liquids and gas, according to TGS Well Data Analytics. With the newly acquired assets, the company enters the Permian Basin at a significant scale (~800 gross locations and ~68,000 net acres) to create a portfolio that maximizes capital allocation flexibility regarding basin and commodity diversity. Tim Rezvan, KeyBanc Capital Markets Inc. Analyst, wrote: “We do not believe the pivot into the Permian was a surprise, but the size, timing, and move into both flanks in one fell swoop may be a surprise.”
Based on $70/bbl WTI and $3.50 HH pricing scenario and well costs of $8.5 million in the Midland and $10 million in Delaware, TGS validated Civitas’ claims that over half of the undeveloped locations of the recently acquired assets have an internal rate of return (IRR) higher than 45%, a payout ratio below 1.5 years, and breakeven prices ranging between $35/boe and $45/boe, making the operator a leader among Permian peers in terms of well performance. For instance, Civitas recent vintage type curves stand favorably when compared with offset operators in their recently acquired assets, as observed in figures 2 and 3, according to TGS Well Data Analytics.
Civitas CEO Christopher Doyle stated that the company plans to cut Hibernia’s rigs from three to two and Tap Rock’s from four to two moving forward. With this recent move into a new basin, Civitas will also test investor appetite to invest in multi-basin operators rather than pure-player companies. Even though investors have recently preferred pure-player companies, that outlook seems to be evolving due to a pressing need to unlock inventory with enough quality and scale.
With TGS Well Data Analytics, this type of analysis can be done quickly. For more information on Well Data Analytics or to schedule a demo, contact us at WDPSales@tgs.com
Figure 1 - TGS Well Data Analytics dashboard showing the operator map, production plot, and type curve plot for Civitas Resources, Tap Rock, and Hibernia in the DJ, Delaware, and Midland Basins, respectively.
Figure 2 - TGS Well Data Analytics image showing the type curve comparison of Tap Rock and offset operator EOG in Lea County in the Delaware Basin. Recent Vintage 2021+ wells included in the analysis.
Figure 3 - TGS Well Data Analytics image showing the type curve comparison of Hibernia and offset operator Pioneer in Reagan County in the Midland Basin. Recent Vintage 2021+ wells included in the analysis.
