Bonanza Creek Energy, Inc. (“Bonanza Creek” or the “Company”)
(NYSE: BCEI) and HighPoint Resources Corporation (“HighPoint”)
(NYSE: HPR) today announced that they have entered into a
definitive merger agreement to combine Bonanza Creek and HighPoint
in a transaction valued at approximately $3761 million as of
November 6, 2020. The transaction value is based on the equity to
be issued to HighPoint equity holders, the equity and debt to be
issued to HighPoint debt holders in connection with the Exchange
Offer (as defined below) and the remaining debt to be assumed.
Bonanza Creek will issue 9.8 million shares of common stock and up
to $100 million in senior unsecured notes in the transaction. The
transaction has been unanimously approved by the board of directors
of each company.
The strategic combination is expected to create the leading
unconventional oil producer in rural Weld County and to
significantly increase free cash flow and economic resilience. With
its enhanced operating scale and significant increase in free cash
flow, the Company plans to pursue a business model focused on
strong capital returns to its shareholders. Highlights of the
transaction include:
- 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 County leasehold position of 206,000 net acres
- Significantly increases expected pro forma 2021 levered free
cash flow2 to ~$130 million.
- Expected to result in approximately $31 million in 2021
synergies on a pro forma basis, with $150 million of 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 $9.00 and $10.00 per Boe
Transaction DetailsUnder 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 United States
Bankruptcy Court for the District of Delaware (the “Court”) to
effectuate the solicited Prepackaged Plan and consummate the
transaction. The consummation of the Prepackaged Plan will be
subject to confirmation by the Court in addition to other
conditions to be set forth in the Prepackaged Plan, a transaction
support agreement (the “TSA”) and related transaction documents,
but approval of the transaction by HighPoint shareholders will not
be required.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 $100 million of newly issued 7.50% senior
unsecured notes due 2026. Based on the number of shares of
HighPoint common stock outstanding and those subject to
equity-based awards, the transaction implies an exchange ratio of
0.114 shares of Bonanza Creek common stock for each share of
HighPoint common stock.Upon closing, Bonanza Creek’s balance sheet
is expected to consist of approximately $50 million of cash, $100
million of senior unsecured notes, and approximately $150 million
of reserve based lending (“RBL”) debt. We expect that the RBL for
the combined company will be determined in the coming weeks. The
combined asset base will likely support a borrowing base well in
excess of Bonanza’s current $260 million borrowing base, near our
existing level.The Company and Fifth Creek Energy Company LLC
(“Fifth Creek”), which owns approximately 46.5% of the outstanding
shares of HighPoint, have entered into a support agreement whereby
Fifth Creek will vote in favor of the Merger (as defined below),
subject to certain customary termination rights.
Additionally, HighPoint, Fifth Creek, and holders of (x) 73% of the
7.0% Senior Notes of HighPoint due October 15, 2022 and (y) 97% of
the 8.75% Senior Notes of HighPoint due June 15, 2025 have entered
into the TSA, which obligates Fifth Creek and the noteholder
parties to support and vote in favor of the transaction, subject to
specified termination rights.Stakeholder
Commentary“The combination of Bonanza Creek and HighPoint
creates significant scale in the rural DJ Basin, which will
immediately increase free cash flow generation,” said Eric Greager,
President and Chief Executive Officer of Bonanza Creek. “The
combination of our complementary asset bases will yield significant
synergies and represents a transformative transaction for Bonanza
Creek.”Scot Woodall, Chief Executive Officer and President of
HighPoint, stated, “This transaction will create a premier DJ Basin
player with a peer leading cost structure and a large,
attractive rural footprint. The transaction provides HighPoint
stakeholders with the opportunity to participate in a larger DJ
Basin producer with both an attractive balance sheet and free
cash flow profile.”Brendan Circle, SVP/Portfolio Manager at
Franklin Advisers, HighPoint’s largest noteholder, commented, “We
are excited to become a shareholder of the new Bonanza Creek.
Bonanza Creek exhibits a number of the qualities that we look for
in investment opportunities: strong management, an excellent
balance sheet, attractive free cash flow profile, and an ability to
return significant cash flow to its shareholders. We look forward
to forging this new relationship with the Bonanza Creek
team.”Strategic Rationale
- 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 million
in 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 million in present value, including $15 million of
near-term capital expenditures savings. In 2021, the Company
expects synergies to be $31 million consisting 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. Eric Greager will serve as the CEO of the
combined company and Brian Steck will serve as chairman of the
board.
Preliminary Pro Forma 2021 OutlookBonanza
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 $130
million of free cash flow assuming NYMEX strip pricing. Full year
production is expected to average between 45,000 and 50,000 Boe/d.
Bonanza Creek expects its combined cash costs to be between $9.00
and $10.00 per Boe.Tax Plan
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.
AdvisorsEvercore is serving as financial
advisor and Vinson & Elkins LLP is serving as legal advisor to
Bonanza Creek. Tudor, Pickering, Holt & Co. / Perella Weinberg
Partners are serving as financial advisor, Kirkland & Ellis LLP
is serving as legal advisor, and AlixPartners, LLP is serving as
restructuring advisor to HighPoint. Akin Gump LLP is serving as
legal advisor to an informal group of HighPoint Noteholders that
have signed the TSA. J.P. Morgan Securities LLC also served
as an advisor to HighPoint.Conference Call
InformationThe Company invites you to join senior
management from Bonanza Creek for an investor call on Monday,
November 9, 2020 at 8:30 a.m. Eastern (6:30 a.m. Mountain), to
discuss the key details and benefits of this transaction.Conference
Call and Webcast:
Date / Time: Monday, November 9,
2020, 8:30 a.m. ET / 6:30 a.m. MTDomestic (Toll Free): (877)
793-4362International: (615) 247-0186Conference 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 November 23, 2020.About the
CompaniesBonanza Creek Energy, Inc. is an independent oil
and natural gas company engaged in the acquisition, exploration,
development, and production of oil and associated liquids-rich
natural gas in the Rocky Mountain region of the United States. The
Company’s assets and operations are concentrated in rural,
unincorporated Weld County, Colorado, within the Wattenberg Field,
focused on the Niobrara and Codell formations. The Company’s common
shares are listed for trading on the NYSE under the symbol: “BCEI.”
For more information about the Company, please visit
www.bonanzacrk.com.HighPoint Resources Corporation (NYSE: HPR) is a
Denver, Colorado based company focused on the development of oil
and natural gas assets located in the Denver-Julesburg Basin of
Colorado. Additional information about HighPoint may be found on
its website at www.hpres.com. No Offer or
SolicitationThis 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 InformationIn
connection with the Transaction, Bonanza Creek and HighPoint intend
to file materials with the U.S. Securities and Exchange Commission
(the “SEC”), including (1) a joint proxy statement in preliminary
and definitive form (the “Joint Proxy Statement”), (2) a consent
solicitation and prospectus with respect to the Exchange Offer and
Consent Solicitation (the “Exchange Prospectus”), of which the
Prepackaged Plan will be a part, (3) a Registration Statement on
Form S-4 with respect to the Merger (the “Merger Registration
Statement”), of which the Joint Proxy Statement will be a part, and
(4) a Registration Statement on Form S-4 with respect to the
Exchange Offer and Consent Solicitation (together with the Merger
Registration Statement, the “Registration Statements”), of which
the Exchange Prospectus will be a part. After the Registration
Statements are declared effective by the SEC, Bonanza Creek and
HighPoint intend to send the definitive form of the Joint Proxy
Statement to the shareholders of Bonanza Creek and the shareholders
of HighPoint, and Bonanza Creek and HighPoint intend to send the
definitive form of the Exchange Prospectus to the debt holders of
HighPoint. These documents are not substitutes for the Joint Proxy
Statement, Exchange Prospectus or Registration Statements or for
any other document that Bonanza Creek or HighPoint may file with
the SEC and send to Bonanza Creek’s shareholders or HighPoint’s
shareholders or debt holders in connection with the Transaction.
INVESTORS AND SECURITY HOLDERS OF BONANZA CREEK AND
HIGHPOINT ARE URGED TO CAREFULLY AND THOROUGHLY READ THE JOINT
PROXY STATEMENT, REGISTRATION STATEMENTS AND EXCHANGE PROSPECTUS,
AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, AND OTHER
RELEVANT DOCUMENTS FILED BY BONANZA CREEK AND HIGHPOINT WITH THE
SEC, WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT BONANZA CREEK, HIGHPOINT, THE TRANSACTION, THE
RISKS RELATED THERETO AND RELATED MATTERS. 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 SEC (when they become available)
through the website maintained by the SEC at www.sec.gov. Copies of
documents filed with the SEC by Bonanza Creek will be available
free of charge from Bonanza Creek’s website at
www.bonanzacrk.com under the “For Investors” tab or by
contacting Bonanza Creek’s Investor Relations Department at (720)
225-6679 or slandreth@bonanzacrk.com. Copies of documents filed
with the SEC by HighPoint will be available free of charge from
HighPoint’s website at www.hpres.com under the “Investors” tab
or by contacting HighPoint’s Investor Relations Department at (303)
312-8514 or lbusnardo@hpres.com.Participants in the
SolicitationBonanza Creek, HighPoint and their respective
directors and certain of their executive officers and other members
of management and employees may be deemed, under SEC rules, to be
participants in the solicitation of proxies from Bonanza Creek’s
shareholders and HighPoint’s shareholders in connection with the
Transaction. Information regarding the executive officers and
directors of Bonanza Creek is included in its definitive proxy
statement for its 2020 annual meeting filed with the SEC on April
24, 2020. Information regarding the executive officers and
directors of HighPoint is included in its definitive proxy
statement for its 2020 annual meeting filed with the SEC on March
18, 2020. Additional information regarding the persons who may be
deemed participants and their direct and indirect interests, by
security holdings or otherwise, will be set forth in the
Registration Statements, Joint Proxy Statement and other materials
when they are filed with the SEC in connection with the
Transaction. Free copies of these documents may be obtained as
described in the paragraphs above.Forward-Looking
Statements and Cautionary StatementsCertain 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 December 31,
2019 and in its subsequently filed Quarterly Reports on Form 10-Q,
each of which is on file with the SEC and available from Bonanza
Creek’s website at www.bonanzacrk.com under the “For Investors”
tab, and in other documents Bonanza Creek files with the SEC, and
in HighPoint’s Annual Report on Form 10-K for the year ended
December 31, 2019 and in its subsequently filed Quarterly Reports
on Form 10-Q, each of which is on file with the SEC and available
from HighPoint’s website at www.hpres.com under the “Investors”
tab, and in other documents HighPoint files with the SEC.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.Investor
ContactsScott LandrethSenior Director, Finance &
Investor Relations and
Treasurer720-225-6679slandreth@bonanzacrk.com
Larry C. BusnardoVice President, Investor
Relations303-312-8514lbusnardo@hpres.com
______________________
1 Reflects HighPoint projected balance sheet at transaction
close2 Levered Free Cash Flow = EBITDAX less change in working
capital, less cash interest expense, less capex3 Cash costs include
LOE, production + ad valorem taxes, GP&T, Cash G&A,
midstream expenses, interest and other cash costs
HighPoint Resources (NYSE:HPR)
Historical Stock Chart
From Jun 2024 to Jul 2024
HighPoint Resources (NYSE:HPR)
Historical Stock Chart
From Jul 2023 to Jul 2024