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May 20, 2022

Centennial to merge with Colgate to create $7bn Permian Basin producer

The combined entity will have approximately 180,000 net leasehold acres and a production capacity of nearly 135,000 barrels of oil equivalent per day.

Centennial Resource Development has signed an agreement with Colgate Energy Partners III to merge their businesses to create a $7bn Permian Basin-focused oil and gas producer.

The combined entity will be a ‘large-scale’ exploration and production (E&P) company, focusing on the assets in the Delaware Basin, the western shale field within the Permian.

The new company is expected to have approximately 180,000 net leasehold acres, 40,000 net royalty acres, and a total production capacity of nearly 135,000 barrels of oil equivalent per day.

Centennial CEO Sean Smith said: “This transformative combination significantly increases scale and drives accretion across all our key financial and operating metrics.

“Colgate’s complementary, high-margin assets are a natural fit for Centennial, creating the largest pure-play E&P company in the Delaware Basin.

“Importantly, the combined company is expected to provide shareholders with an accelerated capital return program through a fixed dividend, coupled with a share repurchase plan.”

The transaction comprises 269.3 million Centennial shares, Colgate’s outstanding net debt of approximately $1.4bn, and cash of $525m.

Upon the completion of the transaction, Centennial shareholders will own a 53% stake in the combined company while the remaining stake will be owned by Colgate owners.

Colgate co-CEO Will Hickey said: “Both companies have established strong financial and operational cultures, and we expect the combined company will be a top-tier, low-cost operator that is able to deliver better margins and shareholder returns.”

Approved by the boards of directors of both companies, the transaction is scheduled to be closed in the later half of this year.

The merger deal is subject to customary closing conditions, including approval by Centennial shareholders and regulatory approvals.

If the deal materialises, Centennial’s current CFO George Glyphis and COO Matt Garrison will continue in their respective roles at the combined company.

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