It’s a $1.6 billion purchase of one Denver-based oil and gas company by another. And the buyer is a well-known operator in western Oklahoma.
Cimarex Energy announced this week it’s buying rival Resolute Energy and the purchase includes debt. But it also adds more assets in the shale-rich Permian Basin for Cimarex.
Cimarex is known for its exploration and production Oklahoma, Texas and New Mexico. In Oklahoma, it’s drilled wells in the Woodford and Meramec Shales. It was last year when Cimarex invested $1.28 billion for exploration in the Mid-Continent and Permian regions.
“This high-quality, bolt-on asset is tailor-made for Cimarex,” said Thomas E. Jorden, Chairman, President and CEO of Cimarex. “It is a perfect fit with our existing Reeves County position and will allow us to leverage our knowledge and deliver superior results over a broader asset base for the benefit of both Cimarex and Resolute shareholders.”
He said the Resolute assets should generate free cash flow in 2019 and fund any more development capital from the start.
Resolute is the smaller of the companies and had a market value of $706.3 million as of the end of September while Cimarex had a value of $8.49 billion. Analysts explained that Resolute Energy was the latest smaller play to cave to investor pressure who had urged the company to sell itself. The investors were reportedly concerned Resolute might not be able to deliver shareholder value even with increased production.
As part of the deal, Resolute shareholders have the option 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 Cimarex common stock.
For the cash offer of $35 per share, the deal represents about 14.8 percent premium to Resolute’s Friday closing price of $30.49 per share.
For the quarter ended Sept. 30, Resolute’s production from the Permian basin jumped more than 50 percent to 3,197 barrels of oil equivalent (boe) per day, over last year.
Monday’s deal adds 35,000 barrels of oil equivalent per day (boe/d) to Cimarex’s production base. The deal is expected to be completed by the end of the first quarter of 2019.