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Under the terms of the transactions, Civitas has agreed to purchase a portion of Tap Rock Resources’ Delaware Basin assets and all of Hibernia Energy III’s Midland Basin assets.
Both Tap Rock and Hibernia are portfolio companies of funds managed by NGP.
Reuters was the first to report that Civitas was in advanced talks with NGP to buy the Permian Basin-focused assets.
Permian is an obvious target for producers looking to increase their inventory. The shale patch, which lies between Texas and New Mexico, has the necessary infrastructure and is known for high productivity and large undeveloped reserves.
Denver-based Civitas currently operates on more than 500,000 net acres and produces roughly 160,000 barrels of oil equivalent per day (boed).
The transactions would increase Civitas’ existing production by 60%, the company said.
The acquisition of the “attractively priced, scaled assets in the heart of the Permian Basin” would lead to increased free cash flow and enhanced shareholder returns, according to Civitas Chief Executive Chris Doyle. “We will soon have nearly a decade of price-resilient, high-return drilling inventory.”
High inflation and greater focus on investor returns had limited shale supply growth in the past year, but HSBC analysts expect shale oil supply to grow at the fastest pace in four years in 2023, with the Permian Basin likely being a key driver.
Plenty of tier-1 acreage still available, indicating shale oil production will grow through to the end of this decade, HSBC analysts wrote in a June 20 note.
The deals are expected to close in the third quarter of 2023.
