BY Fraser Tennant
In a major merger of equals transaction, US oil and gas company Centennial Resource Development, Inc. and oil exploration and production company Colgate Energy Partners III, LLC are to combine in a deal valued at $7bn.
The merger values Colgate at approximately $3.9bn and is comprised of 269.3 million shares of Centennial stock, $525m of cash and the assumption of approximately $1.4bn of Colgate’s outstanding net debt.
The cash consideration and the repayment of Colgate’s outstanding credit facility borrowings at closing are expected to be funded with cash on hand and borrowings under an upsized revolving credit facility.
“This transformative combination significantly increases scale and drives accretion across all our key financial and operating metrics,” said Sean Smith, chief executive of Centennial. “Importantly, the combined company is expected to provide shareholders with an accelerated capital return programme through a fixed dividend coupled with a share repurchase plan.”
Moreover, the combined company will be the largest pure-play exploration and production (E&P) company in the Delaware Basin with approximately 180,000 net leasehold acres, 40,000 net royalty acres and total current production of approximately 135,000 barrels of oil per day.
“The merger of Colgate and Centennial is compelling from a financial, operational and strategic standpoint, establishing a leading Permian Basin independent,” said James Walter, co-chief executive of Colgate. “We believe the pro forma company is positioned to maximise returns for our new investor base, with our combined management team bringing a track record of operational excellence and strategic value creation.”
The transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the second half of 2022.
Upon closing, Sean Smith will serve as executive chair of the board of directors of the newly combined business, and James Walter and Will Hickey, co-chief executives of Colgate, will lead the company as co-chief executives and serve on the board of directors.
The combined company will operate under a new name which is expected to be announced prior to closing.
Mr Hickey concluded: “We expect the combined company will be a top-tier, low-cost operator that is able to deliver better margins and shareholder returns.”
News: Centennial, Colgate Energy combine to create $7-bln Permian basin producer