Report: Will Civitas Sell D-J Basin, Buy Permian’s Double Eagle?

Civitas Resources could potentially exit its Colorado position and acquire more Permian Basin assets, according to analysts and media reports.

Civitas is exploring a sale of its legacy assets in Colorado’s Denver-Julesburg (D-J) Basin, according to unsubstantiated media reports. The Denver-based E&P has retained a financial adviser to assess buyer interest in the assets.

Civitas Resources did not immediately respond to a Hart Energy request for comment.

Civitas is reportedly open to selling all or only portions of its D-J Basin portfolio. Production from Civitas’ D-J Basin assets averaged around 160,000 boe/d (70,674 bbl/d oil) during the third quarter of 2024.

Civitas’ Colorado assets could potentially fetch approximately $4 billion through a sale. Analysts at TD Cowen said the $4 billion headline price tag would screen as a proved developed producing (PDP)-only transaction, with little if any value placed on undeveloped drilling locations.

Given regulatory concerns within Colorado and the relatively short inventory life of Civitas’ D-J assets, a PDP-only deal “makes sense in our view,” TD Cowen analyst Gabe Daoud Jr. wrote in a Jan. 15 report.

Taking the proceeds from a D-J Basin exit, Civitas could try to acquire Double Eagle IV—one of the most coveted private E&Ps remaining in the Permian’s Midland Basin.

Acquiring Double Eagle IV would logically make sense for Civitas, given their overlapping acreage in the Midland Basin, Daoud said.

But buying Double Eagle would have risks, including a high asking price and only around 424 drilling locations, according to TD Cowen estimates.

Analysts had previously questioned whether Ovintiv, which has been more Permian-focused lately, might make a run at acquiring Double Eagle.

But Ovintiv ultimately turned its attention north to its legacy roots in Canada, acquiring Montney Shale assets from Paramount Resources Ltd. for US$2.38 billion (CA$3.33 billion) in cash.

Ovintiv is also selling its Uinta Basin assets in Utah to privately held FourPoint Resources. The transaction is expected to close in the first quarter.

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Civitas was created in 2021 through a combination of three Colorado pure-play producers: Bonanza Creek Energy, Extraction Oil & Gas and Crestone Peak.

But the need for additional inventory outside of Colorado drove Civitas to spend nearly $7 billion on Permian Basin M&A in 2023.

Civitas acquired private equity-backed producers Hibernia Energy III in the Midland Basin for $2.2 billion and Tap Rock Resources in the Delaware Basin for $2.5 billion.

In October 2023, Civitas followed on with a $2 billion acquisition of Vencer Energy, a Midland Basin E&P backed by international commodities trading house Vitol.

Since entering the Permian, Civitas has focused on optimizing costs and drilling efficiently in the D-J Basin.

Civitas is drilling some of the longest laterals in the D-J, including several 4-mile wells that began production last summer, CFO Treasurer Marianella Foschi reported at the 2024 EnerCom Denver conference.

Civitas saw around a 5% reduction in per-foot drilling costs on its 4-mile wells compared to 3-mile wells.

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Civitas: 4-mile Colorado Laterals A ‘Competitive Edge’ in D-J Basin