Oil exploration company acquisition, layoffs take shape

FIRESTONE — Crestone Peak LLC will lay off 159 workers in several counties as part of its pending acquisition by a new oil drilling entity — which itself is also a work-in-progress.

The Worker Adjustment and Retraining Notification gives a Firestone address for Crestone’s 90 Weld County employees. The rest are in Denver, Arapahoe and Douglas counties.

Denver-based Crestone Peak is being bought by Civitas Resources Inc., a company to be formed by a merger of Bonanza Creek Energy Inc. (NYSE: BCEI) and Extraction Oil & Gas Inc. (Nasdaq: XOG), both also in Denver.

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The merger involves three Crestone companies: Crestone Peak Resources LP, CPPIB Crestone Peak Resources America Inc., and Crestone Peak Resources Management LP, according to the press release on Bonanza Creek’s second-quarter report, Aug. 9.

CPPIB stands for Canada Pension Plan Investment Board, Crestone’s primary shareholder.

Closing at the time the mergers and acquisition were announced was set for the end of the third quarter, on Sept. 30. This has been pushed to early Q4, the press release said.

The WARN letter to the Colorado Department of Employment and Labor was filed Sept. 9; it says the closing is anticipated Oct. 15, the date layoffs are effective. Employees were notified June 7.

Workers received at least eight weeks’ severance and “are being considered for hire at the new company,” the letter said.

Bonanza Creek CEO Eric Greager said in the release, “Synergy savings for [the merger] are exceeding our expectations.” He said more details will come as the deal’s close approaches.

According to the release, which included some combined financial information for the three companies, the trio together has an adjusted EBITDAX of $306 million. EBITDAX includes “exploration expense” in the traditional EBITDA formulation.

The three combined have net working capital of negative $350 million and post-merger debt of $500 million.

Bonanza Creek bought a company, HighPoint Resources Corp., out of bankruptcy in April.

Extraction Oil emerged from bankruptcy in December.

Bonanza Creek’s 2020 revenue was $218 million; its trailing 12 months total is 60% higher at $352 million. It has a $1.4 billion market cap. Extraction Oil 2020 revenue was $558 million; it traded recently at a $1.3 billion market cap.

Crestone is privately held and revenue is not readily available; a Denver Post report in June said Crestone will contribute $575 million in free cash flow to Civitas and that its acquisition was for about $1.3 billion.

Press materials on the merger suggest Civitas will have an enterprise value of about $4.5 billion and oil production of 160,000 barrels a day, with proven reserves of about 530 million barrels.

Crestone shareholders will get one-quarter of the new company; Bonanza Creek and Extraction shareholders will split the rest. Greager will be CEO.

The Bonanza Creek-Extraction Oil link-up was set in May. The Crestone buy was announced in June. Names of Civitas’ prospective board members were released in August.

Most of the future Civitas’ operations are in the Denver-Julesburg Basin, along the Front Range and into Wyoming and Nebraska.

Competitors include Occidental Petroleum Inc. (NYSE: OXY), Chevron Corp. (NYSE: CVX) and PDC Energy Inc. (Nasdaq: PDCE).

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