Bonanza Creek and HighPoint enter $376m merger deal

Oil and natural gas firm Bonanza Creek Energy and energy company HighPoint Resources have reached a definite merger agreement.

Valued at about $376m, the deal will see the two companies combine to form a new entity of significant scale in the rural Denver-Julesburg (DJ) Basin.

The new company will have approximately 206,000 acres of leases in the DJ Basin and a daily production of 50,000 barrels per day (bpd) of oil.

According to the companies, the deal has been ‘unanimously approved’ by the directorial board of each company.

It is based on the ‘equity to be issued to HighPoint equity holders’, the ‘equity and debt to be issued to HighPoint debt holders’, as well as the remaining debt to be assumed.

Bonanza Creek president and CEO Eric Greager said: “The combination of Bonanza Creek and HighPoint creates significant scale in the rural DJ Basin, which will immediately increase free cash flow generation.

“The combination of our complementary asset bases will yield significant synergies and represents a transformative transaction for Bonanza Creek.”

As part of the transaction, Bonanza Creek will issue 9,800,000 shares of common stock and about $100m in senior unsecured notes.

The merger transaction is expected to result in around $31m of savings in 2021. It is also expected to significantly increase cash flow to approximately $130m.

HighPoint Resources president and CEO Scot Woodall said: “This transaction will create a premier DJ Basin player with a peer leading cost structure and a large, attractive rural footprint.

“The transaction provides HighPoint stakeholders with the opportunity to participate in a larger DJ Basin producer with both an attractive balance sheet and free cash flow profile.”

In August 2018, Bonanza Creek Energy divested its operations in Mid-Continent US to an undisclosed firm for $117m.