Centennial, Colgate strike $7bn merger agreement
Centennial Resource Development and Colgate Energy Partners, two Delaware Basin producers, have agreed on a $3.9bn merger of equals to form a mid-cap player with output of 135,000 barrels of oil equivalent/day, the companies announced May 19.
Under the agreement, Centennial will put up 269.3mn of its shares and $525mn in cash to absorb Colgate, and will also take on $1.4bn of the latter's outstanding debt pile. Colgate owners will be allocated a 47% equity stake overall, while Centennial shareholders will have 53% interest.
Centennial and Colgate's boards of directors have already cleared the merger, so the deal will go ahead in the second half of 2022. The former company's CEO will become executive chair of the new board, while Colgate co-leads Will Hickley and James Walter will keep their positions once the merger completes.
The portfolio is spread across the Permian Delaware Basin in New Mexico and Texas. Oil and gas production from Colgate's acreage is around 70,000 boe/d at present, while Centennial yielded 61,000 boe/d in 2021 on average, though this had risen to 88,000 boe/d in November 2021. Around 10% of Centennial's output was natural gas.
James Walter, co-CEO of Colgate, said: "The merger of Colgate and Centennial is compelling from a financial, operational and strategic standpoint, establishing a leading Permian Basin independent.
"We believe the pro forma company is positioned to maximize returns for our new investor base, with our combined management team bringing a track record of operational excellence and strategic value creation.
"Management’s significant ownership in the combined company should give investors confidence that long-term value creation will always be our top priority."