The merged entity, which will be named Civitas Resources, will be valued at approximately $2.6bn.
Civitas Resources is expected to be one of the largest pure-play energy producers in Colorado’s Denver-Julesburg (DJ) Basin.
With operation across approximately 425,000 net acres, Civitas will have a production base of 117,000 barrels of oil equivalent per day.
Upon the completion of the deal, shareholders of Bonanza Creek and Extraction will each hold nearly 50% stake in Civitas.
Extraction CEO Tom Tyree said: “We believe the combination of Bonanza Creek and Extraction will create one of the most durable, profitable, and progressive producers in the DJ Basin, with premium assets at the front end of the cost curve.
“Collectively, we will create significant value for all stakeholders as we will become Colorado’s first net-zero oil and gas producer through the continuing reduction in operational emissions coupled with a multi-year investment in certified emissions offsets.”
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Bonanza Creek said that Civitas would be position as the preferred consolidation partner for additional transactions in the DJ Basin.
Additionally, Civitas is expected to adopt an electric vehicle (EV) fleet and instal EV charging stations in its communities, among others as part of sustainability objectives.
Civitas is expected to generate nearly $25m in annual corporate synergies. This includes general and administrative savings and reduced capital costs.
Subject to customary closing conditions, the transaction is anticipated to be closed in the third quarter of 2021.