Civitas Resources Weighs Sale of Colorado Assets
A Potential Game-Changer for the Oil and Gas Producer
Civitas Resources, a prominent oil and gas producer, is considering a sale of its assets in the Denver-Julesburg Basin in Colorado, a move that could fetch over $4 billion. According to sources familiar with the matter, the company is working with a financial advisor to gauge buyer interest and would be open to divesting fully from the basin if the offer is attractive enough.
A Shift in Focus to the Permian Basin
This potential sale would allow Civitas to shed the stigma associated with Colorado, which has been weighing on its valuation, and transform into a pure-play Permian company. The company has already made significant investments in the Permian Basin, acquiring assets from NGP Energy Capital Management for $4.7 billion and Vencer Energy for about $2.1 billion in 2023.
Colorado: A Battleground for the Oil Industry and Environmentalists
The Denver-Julesburg Basin, located in Colorado, is a hotbed of controversy between the oil industry and environmentalists. The state, which is the fourth-largest oil producer in the U.S., has seen its fair share of battles over fossil fuel production. Last year, the industry reached a compromise with environmental groups, agreeing to a fee on every barrel of oil produced in the state, which fluctuates with market prices.
Investor Sentiment and the Future of Civitas
Despite the compromise, investors remain wary of Colorado-focused exploration and production companies, even though they have a clear path until 2028. According to Gabriele Sorbara, an analyst at Siebert Williams Shank, a sale of over $4 billion is reasonable, but it may not be well received in a market that values scale. The company’s shares, however, were up nearly 2% in premarket trading, indicating a positive response to the news.
What’s Next for Civitas Resources?
As Civitas Resources explores its options, one thing is clear: the company is poised for a significant transformation. With its average daily production in the Colorado basin standing at about 169,000 barrels of oil equivalent, the sale of its assets could have a major impact on its future direction. Will the company emerge as a pure-play Permian player, or will it continue to operate in the Denver-Julesburg Basin? Only time will tell.
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