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Bonanza to Merge With Extraction in $2.6B All-Stock Deal

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Bonanza Creek Energy Inc. (BCEI - Free Report) entered a definitive agreement with Extraction Oil & Gas Inc. (XOG - Free Report) to merge in an all-stock deal of equals, wherein shareholders of both companies will have equal percentage shareholdings in the combined entity. Notably, the deal, which is valued at $2.6 billion, is expected to complete in the third quarter of 2021.

The merged entity, renamed as Civitas Resources Inc., will be regarded as the largest pure-play oil and gas company in the Denver-Julesburg (“DJ”) Basin of Colorado. In fact, a majority of the companies’ operations are based in the DJ Basin, spreading across the Front Range and parts of Wyoming and Nebraska.

Since the beginning of 2021, several energy companies have been benefitting from the improved oil and gas prices, with a lot of wheelings and dealings going on. Eventually, the merger took place after both parties accomplished major restructures, as they witnessed unprecedented demand decline due to the pandemic over the past 12 months.

Per the terms of the deal, Extraction shareholders will obtain a fixed exchange ratio of 1.1711 shares of Bonanza Creek common shares in exchange for each of its common shares owned on the closing date. Notably, the deal rejects any premiums that are normally involved in a business acquisition.

The merger is expected to form one of the most durable and advanced producers in the DJ Basin. Moreover, it would create the fourth-largest oil and gas producer in Weld County. Civitas will operate on approximately 425,000 net acres, with a production capacity of 117,000 barrels of oil equivalent per day.

Importantly, the deal is expected to add free cash flow and other per-share metrics along with annual expenses and capital savings worth $25 million.

Company Profile & Price Performance

Headquartered in Denver, Bonanza is an independent energy company engaged in the acquisition, exploration, and development of onshore oil and natural gas properties in the United States.

Shares of the company have outperformed the industry in the past three months. It stock has gained 53.1% compared with the industry’s 29.4% growth.

 

 

Zacks Rank & Stocks to Consider

The company currently has a Zack Rank #3 (Hold).

Some better-ranked players in the energy space are PetroChina Company Limited (PTR - Free Report) and Sprague Resources LP (SRLP - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past 60 days, the Zacks Consensus Estimate for PetroChina’s 2021 earnings has been raised by 283%, while that for Sprague’s 2021 earnings has been increased by 79.4%.

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