Centennial Resource Development, Inc. together with its affiliates
(“CDEV”, “Centennial” or the “Company”) (NASDAQ:CDEV)
(NASDAQ:CDEVW), today announced that it has agreed to acquire 100%
of the leasehold interests and related upstream assets in Reeves
County from Silverback Exploration, LLC (“Silverback”). On November
21, 2016, an affiliate of Riverstone Holdings LLC (“Riverstone”)
entered into a purchase agreement with Silverback to acquire 100%
of its leasehold interests and related upstream assets in Reeves
County for an aggregate purchase price of $855 million in cash,
subject to certain adjustments. On November 27, 2016, Riverstone
and Centennial entered into an agreement to assign, under which the
Riverstone affiliate has agreed to assign, and Centennial has
agreed to assume, Riverstone’s right to purchase such Silverback
assets, subject to the satisfaction of certain conditions. The
acquisition is expected to close on December 30, 2016.
Acquisition Highlights
- ~35,000 net acres directly offsetting existing Centennial
acreage in Reeves County (95% operated, ~88% average
working interest)
- Approximately 3,500 Boe/d of current net production
- At least 600 horizontal drilling locations assuming 880’
spacing prospective for the Upper Wolfcamp A (~210 locations),
Lower Wolfcamp A (~180 locations) and Wolfcamp B (~220
locations)
- Estimated undeveloped resource potential of over 600 MMBoe from
the Wolfcamp A and Wolfcamp B formations with additional upside
potential from the Wolfcamp C, Avalon and Bone Spring
formations
- Contiguous position supports extended lateral development
(acquisition increases operated extended lateral locations by
136%)
Mark Papa, Chief Executive Officer of Centennial
commented, "We are very excited to announce our agreement to
acquire the Silverback assets. While we did not expect to make such
a significant acquisition so quickly, we could not pass up the
opportunity to accretively add core acreage offsetting our existing
Centennial assets at such a compelling price. Pro forma for the
transaction, Centennial will be one of the largest operators in the
Delaware Basin, with over 77,000 contiguous net acres. This
transaction increases our horizontal drilling inventory by 44% and
more than doubles our inventory of extended length laterals, which
we believe provides the most capital efficient development.
Furthermore, this transaction allows us to increase our 2020 oil
production goal from 30,000 Bo/d to 50,000 Bo/d, all the while
maintaining one of the lowest debt levels in the industry. Finally,
we appreciate the continued support of our institutional
shareholders, including Riverstone, and look forward to developing
this high-quality asset base.”
Certain third parties have the right,
exercisable within 30 days of receipt of a notice of Centennial’s
acquisition, to acquire up to ~80% of ~10,000 net acres within the
~35,000 net acres at the purchase price paid by Centennial.
Transaction Financing
In connection with the acquisition, Riverstone
and affiliated funds have committed to invest up to $500 million in
a combination of CDEV common and convertible preferred shares at
the common equivalent of $14.54 per share, subject to adjustment.
The preferred shares will be convertible into common shares upon
the approval of the Company's stockholders of such conversion at a
special meeting. Holders of the preferred shares will not be
entitled to a preferred dividend, but will be entitled to
participate in dividends payable on the common stock. The preferred
shares will also have a liquidation preference of $0.0001 per share
and holders will be entitled to participate with common
stockholders in distributions upon liquidation. The Company intends
to finance the remainder of the purchase price through equity
and/or debt financings. Receipt of the funds necessary to effect
the acquisition pursuant to financing arrangements satisfactory to
CDEV is a condition to its obligation to effect the assignment.
Advisors
Weil, Gotshal & Manges LLP acted as legal
counsel to Centennial. Latham & Watkins LLP acted as legal
counsel to Riverstone. Tudor, Pickering, Holt & Co. acted as
financial advisor to Silverback in connection with the transaction.
Kelly Hart & Hallman LLP acted as legal advisor to
Silverback.
Conference Call
CDEV will make available a pre-recorded
conference call for investors on November 28, 2016 to discuss the
acquisition of Silverback. The call will be made available starting
at 6:00 a.m. Eastern time. Hosting the call will be Mark Papa,
Chief Executive Officer, and George Glyphis, Chief Financial
Officer.
Anyone wishing to listen to the recording may do
so by calling (855) 859-2056. For participants outside of the U.S.,
the dial-in number is (404) 537-3406. The conference ID number is
25572062. The recording will be available until December 9,
2016.
About Centennial Resource Development,
Inc.
Centennial Resource Development, Inc., is an
independent oil and natural gas company focused on the development
and acquisition of unconventional oil and associated liquids-rich
natural gas reserves in the Permian Basin. The Company’s assets and
operations, which are held and conducted through Centennial
Resource Production, LLC, are concentrated in the Delaware Basin, a
sub-basin of the Permian Basin. For additional information about
the Company, please visit www.cdevinc.com.
About Silverback Exploration,
LLC
Silverback Exploration, LLC is a San
Antonio-based, independent oil and gas company focused on the
pursuit of leasing and drilling opportunities in domestic resource
plays, both conventional and unconventional. Silverback was formed
in November 2013 with an equity commitment from EnCap Investments,
L.P.
About Riverstone Holdings
LLC
Riverstone Holdings LLC is an energy and
power-focused private investment firm founded in 2000 by David M.
Leuschen and Pierre F. Lapeyre, Jr. with over $34 billion of
capital raised. Riverstone conducts buyout and growth capital
investments in the exploration & production, midstream,
oilfield services, power, and renewable sectors of the energy
industry. With offices in New York, London, Houston, and
Mexico City, Riverstone has committed over $33 billion to more than
120 investments in North America, Latin America, Europe, Africa,
and Asia.
No Offer or Solicitation
This communication is for informational purposes
only and shall not constitute an offer to sell or the solicitation
of an offer to buy any securities pursuant to the proposed
transactions or otherwise, nor shall there be any sale of
securities in any jurisdiction in which the offer, solicitation or
sale would be unlawful prior to the registration or qualification
under the securities laws of any such jurisdiction.
Forward-Looking Statements
This communication includes certain statements
that may constitute “forward-looking statements” for purposes of
the federal securities laws. Forward-looking statements
include, but are not limited to, statements that refer to
projections, forecasts or other characterizations of future events
or circumstances, including any underlying assumptions. The
words “anticipate,” “believe,” “continue,” “could,” “estimate,”
“expect,” “intends,” “may,” “might,” “plan,” “possible,”
“potential,” “predict,” “project,” “should,” “would” and similar
expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements may include, for
example, statements about the benefits of the transaction described
in this communication; the future financial performance of
Centennial following the transaction; changes in Centennial’s
reserves and future operating results; and expansion plans and
opportunities. These forward-looking statements are based on
information available as of the date of this communication, and
current expectations, forecasts and assumptions, and involve a
number of judgments, risks and uncertainties. Accordingly,
forward-looking statements should not be relied upon as
representing Centennial’s views as of any subsequent date, and
Centennial does not undertake any obligation to update
forward-looking statements to reflect events or circumstances after
the date they were made, whether as a result of new information,
future events or otherwise, except as may be required under
applicable securities laws. You should not place undue
reliance on these forward-looking statements. As a result of
a number of known and unknown risks and uncertainties, Centennial’s
actual results or performance may be materially different from
those expressed or implied by these forward-looking
statements. Some factors that could cause actual results to
differ include Centennial’s ability to recognize the anticipated
benefits of the transaction, which may be affected by, among other
things, competition and the ability of Centennial to grow and
manage growth profitably following the transaction; changes in
applicable laws or regulations; the possibility that Centennial may
be adversely affected by other economic, business, and/or
competitive factors; and other risks and uncertainties indicated in
Centennial’s public filings with the Securities and Exchange
Commission.
Contact:
George Glyphis
Chief Financial Officer
(720) 441-5515
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