Centennial Resource Development and Colgate Energy Partners III have agreed to a merger of equals, the companies said, creating a $7 billion Permian Basin-focused US oil and gas producer.
The deal comes when global crude prices have surged following sanctions on big producer Russia following its invasion of Ukraine, helping create attractive corporate valuations after years of financial underperformance.
Reuters reported in December that the private equity owners of Colgate Energy were preparing to float the shale oil producer on the stock market at a valuation approaching $4 billion.
“Colgate achieves a public listing without having to test a challenging IPO market for upstream companies while Centennial materially boosts scale including more than doubling production and acreage at a fair price,” said Andrew Dittmar, director at energy data and analytics firm Enverus.
Shares of Centennial, founded by shale pioneer Mark Papa, rose 1.3 percent to $7.59.
The deal will create the largest exploration and production firm focused on the Delaware Basin, the westernmost shale field within the Permian and the largest US oil producing basin, the companies said.
The combined company will have a total production of about 135,000 barrels of oil equivalent per day (boepd).
The deal seems “extremely sensible” and was one of the more obvious public/private combinations available with complimentary assets in the northern and southern Delaware basin, Dittmar said.
The deal, which values Colgate at about $3.9 billion, is expected to close in the second half of 2022, following which existing Centennial shareholders will own about 53% of the combined company and Colgate owners the rest.
Sean Smith, Centennial’s CEO, will serve as the combined company’s executive chair, while current Colgate co-CEOs Will Hickey and James Walter will lead it.
For more information visit www.cdevinc.com
