The merger deal is based in the Denver-Julesburg (DJ) Basin to create a new entity and it is valued at $376 million.
Shares of HighPoint Resources (HPR) escalated up to 85.64% in the last trading after the merger news spread in the market. HPR rallied with a heavy volume and kicked off the day at $6.28 soaring from the previous close of $3.76. The stock closed the day as high as $6.98.
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The merger deal with Bonanza Creek Energy, Inc., has lifted the stock. HighPoint Resources has entered into adefinitive merger agreement with Bonanza Creek to join both the companies at an estimated transaction worth of $376 million.
The combined entity will hold up to 206,000 acres of leases in the DJ Basin and will have an oilproduction capacity of 50,000 barrels per day (bpd). The merger project will have a projected savings of almost $31 million and free cash flow of $130 million in 2021. The company intends to keep this free cash flow model running and create a greater worth for the shareholders.
According to the merger agreement, the transaction is subject to the issuance of the equity to HPR equity holders. Whereas, the equity and debt will be issued to HPR debt holders in connection with the Exchange Offer described in the agreement.
Bonanza Creek will issue approximately 9.8 million common stock shares along with senior unsecured notes worth $100 million. The merger deal is approved by the BoDs of both the companies. The transaction is expected to complete as early as in the first quarter of 2021 and as late as in the second quarter.
Upon the closing of the merger transaction, Bonanza shareholders will own 68% stake and HighPoint’s stakeholders will own 32% of the combined entity. While the existing shareholder of HPR will hold 1.6% of the combined company. The participating noteholders of HPR will hold 30.4% and 7.50% senior unsecured notes of the merged company.
The strategic partnership will produce a bigger opportunity for the combined company to emerge as a leading unconventional oil producer in rural Weld County.
The Chief Operating Officer of the company will be Eric Greager, whileBrian Steck will become the chairman of BoDs.The combined company will have a total of 7 board of directors, 5 from Bonanza and 2 from HighPoint.
Both the companies will have a great return from this project as they are aiming for long-term growth. The priority is to increase the value of the combined company and keep the shareholders happy.