Oil and gas producer Civitas Resources is exploring a sale of part or all of its assets in the Denver-Julesburg Basin in Colorado, which could be valued at more than $4 billion, Bloomberg News reported on Wednesday.
The company is working with a financial adviser to gauge buyer interest and would be open to divesting fully from the basin if it receives a sufficiently attractive offer, the report said, citing people familiar with the matter.
Civitas did not immediately respond to a Reuters request for comment.
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“A potential sale would remove the market/investor stigma associated with Colorado, which is weighing on the valuation, and turn Civitas into a pure-play Permian company,” said Gabriele Sorbara, analyst at Siebert Williams Shank.
In 2023, Civitas acquired some Permian assets from private equity firm NGP Energy Capital Management for $4.7 billion and some acreage in the Midland Basin from Vencer Energy for about $2.1 billion.
The company’s average daily production in the Colorado basin stands at about 169,000 barrel of oil equivalent.
Colorado, the fourth-largest oil producing state in the U.S., is a frequent battleground for the oil industry and environmentalists, who over the years have pushed for tougher regulations on fossil fuel production.
The industry reached a compromise with environmental groups last year, which included charging a fee that fluctuates with market prices on every barrel of oil produced in the state.
“Investors do not want to touch Colorado-focused E&Ps (exploration and production companies) even though they are in the clear until 2028,” Sorbara said.
Besides, while a “valuation north of $4.0 billion is reasonable”, the company would be “shrinking not just in market cap and enterprise value, but also lower capital returns, which may not be well received in a market that places value on scale”, Sorbara added.
The company’s shares were up nearly 2% in premarket trading.
(Reporting by Pooja Menon in Bengaluru; Editing by Shilpi Majumdar)
