Centennial Resource Development (CDEV) Announces $855M Acquisition of Reeves County Upstream Assets from Silverback Exploration
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Centennial Resource Development, Inc. together with its affiliates (Nasdaq: CDEV) (Nasdaq: CDEVW) 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.
- ~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.
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.
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.
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.
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