Bonanza Creek Announces Transformative Agreement to Acquire Restructured HighPoint Resources
- Creates a company of scale in the rural
DJ Basinwith production of 50,000 Boe/d and a consolidated, contiguous leasehold position of approximately 206,000 net acres
- Accretive on all key financial metrics with a transformative impact on sustainable free cash flow generation
The strategic combination is expected to create the leading unconventional oil producer in rural
- Materially increases Bonanza Creek’s scale based on expected pro forma fourth quarter production of 50,000 Boe/d (53% oil) and a rural
Weld Countyleasehold position of 206,000 net acres
- Significantly increases expected pro forma 2021 levered free cash flow2 to
- Expected to result in approximately
$31 millionin 2021 synergies on a pro forma basis, with $150 millionof PV10 synergies total, which represents nearly 45% of Bonanza Creek’s market capitalization at announcement
- Maintains strong balance sheet with an estimated pro forma leverage ratio less than 0.7x at the estimated closing date
- Low cost operations with anticipated pro forma cash costs3 between
$9.00and $10.00per Boe
Under the terms of the definitive merger agreement, Bonanza Creek and HighPoint have agreed to commence a registered exchange offer and consent solicitation (the “Exchange Offer and Consent Solicitation”) and simultaneous solicitation of a prepackaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code (the “Prepackaged Plan”). The Exchange Offer and Consent Solicitation will be conditioned on a minimum participation of not less than 97.5% of the aggregate outstanding principal amount of HighPoint senior unsecured notes (the “HighPoint Notes”) (the “Minimum Participation Condition”).
If the Minimum Participation Condition is met, and if certain customary closing conditions are satisfied (including approval by each company’s shareholders), the companies will effect the Exchange Offer and Consent Solicitation, and Bonanza Creek will acquire HighPoint at closing outside of chapter 11.
Upon a successful Exchange Offer and Consent Solicitation, the HighPoint Notes will be stripped of substantially all protective covenants, including covenants restricting incurrence of secured debt and asset dispositions, which could result in the incurrence of secured debt by, or the transfer of assets, from HighPoint. The HighPoint Notes will also be amended to eliminate certain events of default. Prior to the Exchange Offer and Consent Solicitation, the HighPoint Notes will be amended to permit transactions described herein without triggering a change of control and, as a result, no change of control offer will be made upon consummation of the transactions. Upon a successful out-of-court Exchange Offer and Consent Solicitation, tendered HighPoint Notes shall receive cash in the amount of any accrued and unpaid interest on such HighPoint Notes from the most recent payment date to, but excluding the closing date.
If the Minimum Participation Condition is not met, HighPoint intends to file voluntary petitions under Chapter 11 with the
The transaction is expected to close in the first quarter of 2021 under the Exchange Offer and Consent Solicitation or no later than the second quarter of 2021 under the Prepackaged Plan.
Upon completion of the transaction, Bonanza Creek shareholders will own approximately 68% of the combined company and HighPoint’s stakeholders will own approximately 32%. Existing HighPoint shareholders will own approximately 1.6% of the combined company while participating HighPoint noteholders will receive in the aggregate shares representing approximately 30.4% of the combined company and up to
Upon closing, Bonanza Creek’s balance sheet is expected to consist of approximately
The Company and
“The combination of Bonanza Creek and HighPoint creates significant scale in the rural
- Creates the Leading Rural DJ Producer – On a pro forma basis, Bonanza Creek will have approximately 206,000 net acres in
Weld County. Approximately 100% of the pro forma acreage will be unincorporated acreage not subject to regulation by municipalities, and only approximately 8% of the acreage will be subject to Federal mineral or surface regulations. Bonanza Creek remains committed to engaging community stakeholders to ensure safe, thoughtful, and responsible development.
- Enhances Size and Scale – On a pro forma basis, fourth quarter 2020 production is expected to be approximately 50,000 Boe/d, with oil representing ~53%.
- Disciplined Capital Allocation – The transaction is expected to accelerate Bonanza Creek’s transition to a business model that focuses on free cash flow generation by increasing projected free cash flow to approximately
$130 millionin 2021, assuming NYMEX strip pricing. The Company will use excess free cash flow to reduce debt, return capital to shareholders, reinvest in the business, and pursue additional value-driven consolidation opportunities.
- Drives Significant Synergies – Bonanza Creek expects the strategic combination to generate significant synergies of
$150 millionin present value, including $15 millionof near-term capital expenditures savings. In 2021, the Company expects synergies to be $31 millionconsisting of savings from general and administrative expenses, lease operating expenses and capital expenditures. Additionally, the integration of HighPoint’s midstream infrastructure into Bonanza Creek’s Rocky Mountain Infrastructure should provide additional flow assurance, operating and surface cost efficiencies and greater flexibility to third-party processing and takeaway.
- Maintains Strong Balance Sheet and Liquidity – Bonanza Creek expects to maintain its strong financial position with an estimated pro forma net debt-to-EBITDAX ratio at the estimated closing date under the Exchange Offer and Consent Solicitation of less than 0.7x on 2021 EBITDAX.
- Accretive to Financial Metrics – The transaction is expected to be immediately accretive in the first year to all relevant per-share-metrics, including cash flow, free cash flow, and net asset value. The transaction is also expected to be accretive to general and administrative expenses per Boe and lease operating expenses per Boe.
Governance and Leadership
Following the completion of the transaction, the board of directors of the combined company will consist of 7 members: 5 directors from Bonanza Creek and 2 selected by HighPoint’s supporting noteholders.
Preliminary Pro Forma 2021 Outlook
Bonanza Creek’s long-term strategy is to be a low-cost operator focused on generating free cash flow and returning cash to shareholders. In 2021, the Company is expected to generate approximately
In connection with the transaction, Bonanza Creek has entered into a tax benefits preservation plan designed to protect the availability of the Company’s existing net operating loss carryforwards and other tax attributes (collectively, the “Tax Benefits”). The Company’s ability to use its Tax Benefits would be substantially limited if it were to experience an “ownership change,” as defined under Section 382 of the Internal Revenue Code. Further details of the tax benefits preservation plan are provided in a separate Bonanza Creek announcement issued today.
Evercore is serving as financial advisor and
Conference Call Information
The Company invites you to join senior management from Bonanza Creek for an investor call on
Conference Call and Webcast:
Date / Time:
Domestic (Toll Free): (877) 793-4362
International: (615) 247-0186
Conference ID: 6789828
A live webcast and replay of this event will be available under the “For Investors - Events” page on the Investor Relations section of the Company’s website at www.bonanzacrk.com. This replay will be available through
About the Companies
No Offer or Solicitation
This communication relates to a proposed business combination transaction (the “Merger”) between Bonanza Creek and HighPoint, which includes the commencement of the Exchange Offer and Consent Solicitation and the solicitation of the Prepackaged Plan (together with the Merger and the Exchange Offer and Consent Solicitation, the “Transaction”). Communications in this document do not constitute an offer to sell or the solicitation of an offer to subscribe for or buy any securities or a solicitation of any vote or approval with respect to the Transaction, the Exchange Offer and Consent Solicitation or otherwise, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Important Additional Information
In connection with the Transaction, Bonanza Creek and HighPoint intend to file materials with the
Investors will be able to obtain free copies of the Registration Statements, Joint Proxy Statement and Exchange Prospectus, as each may be amended from time to time, and other relevant documents filed by Bonanza Creek and HighPoint with the
Participants in the Solicitation
Bonanza Creek, HighPoint and their respective directors and certain of their executive officers and other members of management and employees may be deemed, under
Forward-Looking Statements and Cautionary Statements
Certain statements in this document concerning the Transaction, including any statements regarding the expected timetable for completing the Transaction, the results, effects, benefits and synergies of the Transaction, future opportunities for the combined company, future financial performance and condition, guidance and any other statements regarding Bonanza Creek’s or HighPoint’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not historical facts are “forward-looking” statements based on assumptions currently believed to be valid. Forward-looking statements are all statements other than statements of historical facts. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “estimate,” “probable,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “would,” “potential,” “may,” “might,” “anticipate,” “likely” “plan,” “positioned,” “strategy,” and similar expressions or other words of similar meaning, and the negatives thereof, are intended to identify forward-looking statements. Specific forward-looking statements include statements regarding Bonanza Creek and HighPoint’s plans and expectations with respect to the Transaction and the anticipated impact of the Transaction on the combined company’s results of operations, financial position, growth opportunities and competitive position. The forward-looking statements are intended to be subject to the safe harbor provided by Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, the possibility that shareholders of Bonanza Creek may not approve the issuance of new shares of Bonanza Creek common stock in the Transactions or that shareholders of HighPoint may not approve the Merger Agreement; the risk that a condition to closing of the Transaction may not be satisfied, that either party may terminate the Merger Agreement or that the closing of the Transaction might be delayed or not occur at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction; the diversion of management time on transaction-related issues; the ultimate timing, outcome and results of integrating the operations of Bonanza Creek and HighPoint; the effects of the business combination of Bonanza Creek and HighPoint, including the combined company’s future financial condition, results of operations, strategy and plans; the ability of the combined company to realize anticipated synergies in the timeframe expected or at all; changes in capital markets and the ability of the combined company to finance operations in the manner expected; regulatory approval of the transaction; the effects of commodity prices; the risks of oil and gas activities; the risk that the requisite amount of HighPoint debt does not participate in the Exchange Offer and Consent Solicitation and that HighPoint may need to reorganize in bankruptcy as a result; the risks and unpredictability inherent in the bankruptcy process; and the fact that operating costs and business disruption may be greater than expected following the public announcement or consummation of the Transaction. Expectations regarding business outlook, including changes in revenue, pricing, capital expenditures, cash flow generation, strategies for our operations, oil and natural gas market conditions, legal, economic and regulatory conditions, and environmental matters are only forecasts regarding these matters.
Additional factors that could cause results to differ materially from those described above can be found in Bonanza Creek’s Annual Report on Form 10-K for the year ended
All forward-looking statements speak only as of the date they are made and are based on information available at that time. Neither Bonanza Creek nor HighPoint assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.
Senior Director, Finance & Investor Relations and Treasurer
Vice President, Investor Relations
1 Reflects HighPoint projected balance sheet at transaction close
2 Levered Free Cash Flow = EBITDAX less change in working capital, less cash interest expense, less capex
3 Cash costs include LOE, production + ad valorem taxes, GP&T, Cash G&A, midstream expenses, interest and other cash costs
Source: Bonanza Creek Energy, Inc.
Source: HighPoint Resources Corporation
Data Provided by Refinitiv. Minimum 15 minutes delayed.