Civitas Resources may merge with fellow Permian producer SM Energy, Bloomberg reported today, citing unnamed sources in the know.
The sources told the publication the deal would likely take the form of a merger between equals with no premium included in the price tag. Once combined, the new company would be worth some $14 billion, Bloomberg has calculated, which would make the deal one of the largest this year in the energy space.
Civitas Resources has a market value of some $3.2 billion, while SM Energy is worth around $2.9 billion, the report also said, adding enterprise values for the two companies came in at $5.5 billion for SM Energy and $8.5 billion for Civitas. If the deal takes place, the combined company would have acreage of around 250,000 acres across the Permian, the Eagle Ford, the Uinta Basin in Utah, and Colorado’s Denver-Julesburg Basin.
Merger and acquisition activity in the shale patch has been frantic, or rather, it used to be until this year, which got off to a strong start but then the pace of new deals slackened off as prices dipped and the target pool shrank.
“Upstream deal markets are heading into the most challenging conditions we have seen since the first half of 2020. High asset prices and limited opportunities are colliding with weakening crude,” Andrew Dittmar, principal analyst at Enverus, said in April this year.
“Going back to the start of 2014, oil prices have fallen by more than 5% quarter-over-quarter 17 times. In 11 of the quarters with materially lower crude prices, deal activity fell compared to the prior three months, with an average decline in transacted deal value of 30%,” the energy analytics firm also said at the time.
Oil prices are down 10% since the start of the year, but with the consolidation wave in U.S. shale, smaller independents are looking for an edge as Big Oil only gets bigger. Mergers of equals are one way to gain that edge.
By Irina Slav for Oilprice.com
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