D-J drillers Bonanza Creek, Extraction to combine

DENVER — Two of the largest oil and gas producers in Weld County intend to combine in a merger of equals to form a single drilling company valued at $2.3 billion.

Bonanza Creek Energy Inc. (NYSE: BCEI) and Extraction Oil & Gas Inc. (OTCMKTS: XOG) said in a joint statement Monday morning that the two intend to combine in an all-stock deal under a new name, Civitas Resources Inc. The majority of the two drillers’ operations are in the Denver-Julesburg Basin, spanning along the Front Range and portions of Wyoming and Nebraska.

While the board will be split between four members nominated by each company, Bonanza CEO Eric Greager will serve as the combined company’s chief executive. The shareholders of both companies are expected to hold 50% of Civitas after the merger’s close.

“We believe the combination of Bonanza Creek and Extraction will create one of the most durable, profitable, and progressive producers in the DJ Basin,” Extraction CEO Tom Tyree said in a statement.

The deal doesn’t include any premiums that would normally be involved in a business acquisition.

The merger would create the fourth-largest oil and gas producer in Weld County. The two companies produced a combined 24.76 million barrels of oil and 160.35 million MCF of natural gas in 2020 and 2021 so far, according to data from the Colorado Oil and Gas Conservation Commission.

The larger companies ahead of Civitas are Occidental Petroleum Inc. (NYSE: OXY), Chevron Corp. (NYSE: CVX) after it acquired Noble Energy last year for $5 billion and PDC Energy Inc. (Nasdaq: PDCE).

The merger comes months after both companies completed major restructures in the wake of the pandemic hammering demand for fuel through most of the past 12 months. Bonanza acquired HighPoint Resources Corp. in April after a bankruptcy judge allowed HighPoint to merge as part of an effort to clear its long-term debt, while Extraction emerged from Chapter 11 bankruptcy last year after swapping $1.13 billion in senior debt held by investors for new stock.

The deal is subject to regular antitrust reviews and a final vote of approval between Bonanza and Extraction’s shareholders. The companies expect the deal to close in the third quarter of 2021.

Bonanza and Extraction also claim that the combined company will be the first oil and gas producer to reach net-zero emissions status by acquiring offsets for carbon and other pollutants, along with reducing its emissions during production. 

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