This morning, oil and gas exploration and production firm
Cimarex (XEC 88.90, +0.14) announced a deal that adds to its existing foothold in the Permian
Basin through the acquisition of E&P peer Resolute Energy (REN 34.95,
Cimarex announced a definitive agreement to acquire Resolute in a cash and stock deal worth $35 per share for a total purchase price of $1.6 bln, including Resolute’s long term debt of $710 mln. The deal’s closure is expected by the first quarter of 2019.
Management expects the deal, which is to provide the company with an attractive gain of 21,100 net acres located in the Delaware Basin region of the Permian in Reeves County, Texas, to be accretive to 2019 earnings and non-GAAP free cash flow. Pro forma Q3 2018 production for said gained acres was over 253 MBOE/d (79,647 bo/d).
On a pro forma basis, the combined company will control 280,100 acres in the Reeves County area. The combination adds production of 35 MBOE/D (45% oil) to Cimarex's base.
The terms of the deal hold that Resolute shareholders will have the right to receive 0.3943 shares of Cimarex common stock, $35 per share in cash, or a combination of $14 per share in cash and 0.2366 share of common stock. The cash portion of the transaction is expected to be funded through a combination of cash on hand (including proceeds from the previously announced sale of assets in Ward County, Texas) and borrowings under Cimarex's revolving credit facility. The stock and cash amounts are subject to proration for total stock and cash mix of 60% and 40%, respectively.
Upon the closing of the deal, Cimarex shareholders will own approximately 94.4% of the combined company, and Resolute shareholders will own approximately 5.6%. Upon closing, the Board of Directors and executive team of Cimarex will remain unchanged.
XEC shares have come off session lows and now stand about 0.2% higher (vs losses of 7.4% this morning) while REN recoups both its 50-day simple moving average (32.43) and its 200-day (32.79) on a 14.6% advance.
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