Centennial Resource Development (CDEV) Boosted on Oil Fields Acquisition

Shares of Centennial Resource Development Inc (NASDAQ:CDEV) rose over seven percent higher before the final bell today, jumping $1.09 to $16.40. The independent oil producer announced this morning that it has agreed to acquire all of Silverback Exploration LLC’s upstream assets in Reeves County, Texas – significantly boosting the company’s oil production capacity.

Centennial’s stock is trading on heavy volume, with more than 1.6 million shares already exchanged today. On a typical trading day, only about 745,000 shares of the company’s stock change hands.

Specifically, Centennial will be buying 100 percent of Silverback’s leasehold interests and related upstream – or, exploration and production – assets. Riverstone Holdings LLC – one of Centennial’s institutional shareholders – was actually the first buyer, paying $855 million in cash for the goods on November 21 of this year.

Yesterday, on November 27, Riverstone and Centennial entered into a contract under which Centennial will assume all Riverstone’s rights to the Silverback assets.

“We are very excited to announce our agreement to acquire the Silverback assets,” said Mark Papa, Chief Executive Officer of Centennial Resource Development. “While we did not expect to make such a significant acquisition so quickly, we could not pass up the opportunity to accretively add core acreage offsetting our existing Centennial assets at such a compelling price.”

Mr. Papa told shareholders that, if the company’s projections are correct, Centennial will be one of the largest oil drillers in the Delaware Basin – with more than 77,000 contiguous total acres. The deal will boost the company’s horizontal drilling inventory by 44 percent. The transaction is also expected to more than double Centennial’s extended length laterals, which the company believes generates the most capital efficient development.

The purchase means that Centennial can boost its 2020 oil production target from 30,000 Bo/d (barrels of oil per day) to 50,000 Bo/d, while simultaneously keeping its debt at one of the lowest levels in the sector.

Under the terms of the agreement, Riverstone – and associated funds – have promised to invest as much as $500,000 in a mix of both Centennial’s common shares and preferred shares. The purchase price will be approximately $14.54 per share, subject to future adjustments. The company’s preferred shares are transferrable to regular shares, but only if its shareholders give their consent at a “special meeting.”

Tim is a contributing analyst for EconomicCalendar.com and specializes in equities trading and public offerings. He is a graduate of UCLA and began his career doing capital markets research for a top investment banking software provider.