A record consolidation wave has been sweeping through the U.S. shale industry. A post-COVID surge in oil prices flooded the sector with cash, and buyers have been seeking to lock up the best drilling sites.
Validus prevailed in the auction for Tulsa-based Citizen Energy over other bidders, the sources said, requesting anonymity as the discussions are confidential.
Citizen, backed by private equity firm Warburg Pincus, started exploring a sale in recent months after Validus offered to buy the company, the sources said.
Warburg and Citizen declined to comment. Validus did not respond to requests for comment.
The deal marks the second notable acquisition in the Mid-Continent region for Validus, which earlier this year spent roughly $450 million to buy assets from Continental Resources, the sources said. Continental did not respond to requests for comment.
The latest iteration of Citizen was launched with a $300 million equity commitment from Warburg in 2018 and has grown through acquisitions into one of the largest private oil and gas producers in the Mid-Continent basin, which predominantly covers Oklahoma, and includes parts of Kansas, Texas, and Arkansas.
The region initially drew investors in the mid-2010s but did not live up to production forecasts.
This caused many companies to fail, or sell for a fraction of their previous value. One of Citizen's acquisitions was of Roan Resources for $1.52 a share in 2019, roughly a year after Roan's shares peaked at $16 a share.
The subsequent consolidation of the region's privately owned producers created sizable companies that have now become attractive acquisition targets for larger, cash-flush energy companies.
Validus, whose previous venture was focused on south Texas and was sold for $1.8 billion to Devon Energy (DVN.N), opens new tab in 2022, is backed by institutional investors and its management team, which includes former investment banker Cameron Brown and Felix Energy founder Skye Callantine, according to its website.
