Centennial to acquire Silverback’s upstream assets in Reeves County for $855m

Centennial Resource Development has agreed to acquire 100% of the leasehold interests and related upstream assets in Reeves County from US-based Silverback Exploration in a deal valued at $855m.

On 21 November this year, an affiliate of Riverstone signed an agreement to acquire 100% of Silverback’s leasehold interests and related upstream assets in Reeves County.

The acquisition is expected to close on 30 December this year.

The acquisition includes about 35,000 net acres directly offsetting existing Centennial acreage in Reeves County and about 3,500 barrels of oil equivalent per day (boe/d) of current net production.

Furthermore, Centennial will acquire at least 600 horizontal drilling locations assuming 880in spacing prospective for the Upper Wolfcamp A, Lower Wolfcamp A and Wolfcamp B.

Centennial Resource Development CEO Mark Papa said: “Pro forma for the transaction, Centennial will be one of the largest operators in the Delaware Basin, with more than 77,000 contiguous net acres.

" … This transaction allows us to increase our 2020 oil production goal from 30,000boe/d to 50,000boe/d, all the while maintaining one of the lowest debt levels in the industry."

“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 30,000boe/d to 50,000boe/d, all the while maintaining one of the lowest debt levels in the industry.”

Certain third parties have the right to acquire up to 80% of 10,000 net acres within the 35,000 net acres at the purchase price paid by Centennial.

The right is exercisable within 30 days of receipt of a notice of Centennial’s acquisition.

In connection with the acquisition, Riverstone and affiliated funds will invest up to $500m in a combination of CDEV common and convertible preferred shares.

Centennial proposes to finance the remainder of the purchase price through equity and / or debt financings.