Cimarex to acquire Resolute Energy for $1.6 billion
DENVER -- Cimarex and Resolute Energy have entered into a definitive agreement where Cimarex will acquire Resolute in a cash and stock transaction valued at $35.00/share, or a total purchase price of approximately $1.6 billion.
The transaction includes Resolute's long term debt of $710 million, as of September 30, 2018. The transaction was unanimously approved by both companies' boards of directors. Resolute is a pure-play company operating mainly in the Delaware region of the Permian basin.
"This high-quality, bolt-on asset is tailor-made for Cimarex," said Thomas E. Jorden, chairman, president and CEO of Cimarex. "It is a perfect fit with our existing Reeves County position and will allow us to leverage our knowledge and deliver superior results over a broader asset base for the benefit of both Cimarex and Resolute shareholders. The Resolute assets are expected to generate free cash flow in 2019, basically funding any additional development capital from the start. I want to compliment Rick Betz and the entire Resolute team on the outstanding job that they have done in building these premier Reeves County assets."
Cimarex will continue to maintain an industry-leading cost structure and strong balance sheet. Cimarex expects the combined companies to generate free cash flow in 2020.
"Today's transaction further demonstrates the commitment of the board of directors and entire management team at Resolute to maximizing long term value for the company's shareholders," said Rick Betz, CEO of Resolute. "Our dedicated team of talented professionals has worked tirelessly to position this company to be able to capitalize on the tremendous opportunity this merger represents. The combination of our assets and people with the incredibly strong platform that Tom and his team at Cimarex have built will surely lead to superior results for the shareholders of both companies. We look forward to working through a seamless transition with the Cimarex team."
Strategic and financial benefits include:
Acquisition consistent with capital allocation strategy: Cimarex utilized its disciplined returns-driven approach in this transaction, employing its strong balance sheet to acquire assets with attractive returns that are competitive with those in Cimarex's existing high-return portfolio.
Operational excellence results in productivity gains: Through the application of sound, idea-driven science, Cimarex has shown significant well productivity gains in this area. Cimarex expects to apply these learnings to the acquired properties in the future.
Increases scale of key Delaware basin asset: Net acres in Reeves County, Texas, increase 34% with the addition of 21,100 acres. Pro forma Q3 2018 production was over 253,000 boed.
Terms and Financing
Under the terms of the definitive merger agreement, Resolute shareholders will have the right to receive 0.3943 shares of Cimarex common stock, $35 per share in cash, or a combination of $14 per share in cash and 0.2366 share of common stock. The amount of stock and cash is subject to proration for total stock and cash mix of 60% and 40%, respectively.
The cash portion of the transaction is expected to be funded through a combination of cash on hand (including proceeds from the previously announced sale of assets in Ward County, Texas) and borrowings under Cimarex's revolving credit facility. Upon closing, Cimarex’s board of directors and executive team will remain unchanged.
