Civitas Resources to Enter Permian Basin through Transformative Transactions

Civitas Resources (NYSE: CIVI) (“CIVI” or the “Company”) today announced the signing of two definitive agreements to acquire oil producing assets in the Midland and Delaware Basins of west Texas and New Mexico. The agreements were signed with affiliates of Hibernia Energy III, LLC (“Hibernia”) and Tap Rock Resources, LLC (“Tap Rock”), which are respective portfolio companies of funds managed by NGP Energy Capital Management, L.L.C. (“NGP”), for total consideration of approximately $4.7 billion, subject to customary purchase price adjustments. The transactions will fundamentally transform Civitas into a stronger, more balanced, and sustainable enterprise with a deep inventory of high-return drilling opportunities in the heart of the Permian and DJ basins. Both transactions are subject to customary terms and conditions and are expected to close in the third quarter of 2023 with effective dates of July 1, 2023.

Civitas plans to hold a conference call to discuss the transactions at 6:30 a.m. MDT (8:30 a.m. EDT) on June 20, 2023. Participation details are included within this release. Slides accompanying today’s release are available at www.civitasresources.com.

Transaction Highlights

• Permian Basin entry with immediate scale: The combined transactions will add approximately 68,000 net acres (90% held-by-production) in the Midland and Delaware basins and will add combined proved reserves of approximately 335 MMBoe, as of year-end 2022. The transactions will increase Civitas’ existing production by 60%, adding approximately 100 MBoe/d (54% oil) of current production with the acquired assets expected to average approximately 105 Mboe/d from close through year-end 2023.

• Adds premium, low breakeven oil inventory, enhances oil-weighting and margins: Combined, the acquisitions will add about 800 gross locations with approximately two-thirds having an estimated IRR of more than 40% at $70/Bbl WTI and $3.50/MMBtu Henry Hub NYMEX pricing. The Company’s pro forma oil-weighting is expected to increase to nearly 50%.

• Attractively priced, immediately accretive to key financial metrics: The acquisitions are attractively priced at 3.0x 2024 estimated Adjusted EBITDAX(1) (after taking into account the consummation of the transactions), in-line with recent Permian transactions. The transactions are expected to deliver an estimated 35% uplift to 2024 Free Cash Flow per share. Civitas expects to generate approximately $1.1 billion of pro forma Free Cash Flow in 2024 at $70/Bbl WTI and $3.50/MMBtu Henry Hub NYMEX pricing

• Increases peer-leading dividend and remains committed to long-term balance sheet strength: Under its existing dividend framework, Civitas expects that its total pro forma dividend will increase by about 20% in 2024. As of the third quarter of 2023, Civitas expects leverage to be approximately 1.1x with a reduction target of less than 1x by year-end 2024. To accelerate debt reduction, the Company amended its share buyback authorization to $500 million through year-end 2024 (previously $1 billion through year-end 2024). In addition, the Company plans to sell approximately $300 million in non-core assets by mid-2024.

• Balanced portfolio maximizes capital allocation flexibility: Post close, Civitas will have a more balanced asset portfolio with basin and commodity diversity. The transactions will provide flexibility in future capital allocation and optimize returns.

“These accretive and transformative transactions will immediately create a stronger, more balanced and sustainable Civitas,” said Chris Doyle, Civitas President & CEO. “By acquiring attractively priced, scaled assets in the heart of the Permian Basin, we advance our strategic pillars through increased free cash flow and enhanced shareholder returns. We will soon have nearly a decade of price-resilient, high-return drilling inventory. Our strong capital structure allowed us to capture these transformational assets, and, importantly, behind the strength of the pro forma business, we have a clear path to reduce leverage and maintain long-term balance sheet strength.”

Delaware Basin Entry

Civitas has agreed to purchase a portion of Tap Rock’s Delaware Basin assets for $2.45 billion, which includes $1.5 billion in cash and approximately 13.5 million shares of Civitas common stock valued at approximately $950 million, subject to customary anti-dilution and purchase price adjustments. Tap Rock will retain its ownership of the Olympus development area.

The assets include…