November 19, 2018 / 12:15 PM / 5 months ago

UPDATE 3-Cimarex to pay 15 pct premium for Resolute Energy in Permian push

(Adds CEO comment from conf. call, analyst quote; updates share prices)

By Shanti S Nair and Debroop Roy

Nov 19 (Reuters) - Oil and gas producer Cimarex Energy Co on Monday agreed to buy smaller rival Resolute Energy Corp for about $811 million, adding more assets in the shale-rich Permian Basin for a premium of roughly 15 percent.

The region has seen several deals as bigger producers add more assets, allowing them to negotiate better with oilfield services, frac sand providers and pipeline operators as production costs rise.

As part of the deal, Resolute shareholders have the option to receive 0.3943 shares of Cimarex common stock, $35 per share in cash, or a combination of $14 per share in cash and 0.2366 share of Cimarex common stock.

For the cash offer of $35 per share, the deal represents a 15 percent premium to Resolute's Friday closing price of $30.49 per share.

Based on 23.16 million Resolute shares, the deal is worth $810.7 million, according to a Reuters calculation. Including debt, the deal is worth $1.6 billion, Cimarex said.

Resolute Energy is the latest smaller player to bow to pressure from investors, who have been urging the company to sell itself, saying they were worried the it might not be able to "deliver shareholder value" even with a growth in production.

"With the oil market uncertain and Resolute facing activist shareholders, it would seem that the decision was to take the money now, rather than try to continue to grow production but spend within cash flow," David Beard, analyst at Coker Palmer Institutional, said.

Cimarex had a market value of $8.49 billion, while Resolute was valued at about $706.3 million as of Sept.29, according to Refinitiv data. Cimarex Chief Executive Officer Thomas Jorden said on a conference call with analysts that being a smaller player, Resolute "didn't have the breadth to test developments and well completion styles", which are essential for producers looking to increase output and lower costs.

Analysts at investment bank Tudor, Pickering and Holt said Resolute's acreage in the Delaware basin sits directly adjacent to Cimarex's.

For the quarter ended Sept. 30, Resolute's production from the Permian basin jumped more than 50 percent to 3,197 barrels of oil equivalent per day (boe/d) over last year.

Monday's deal adds 35,000 boe/d to Cimarex's production base. The deal is expected to be completed by the end of the first quarter of 2019.

Shares of Cimarex fell about 1 percent to $87.90, while those of Resolute, which have been down 3 percent so far this year, rose about 14 percent to $34.71 in morning trade. (Reporting by Shanti S Nair and Debroop Roy in Bengaluru; Editing by Arun Koyyur)

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