Former EOG CEO Mark Papa completes acquisition of Delaware Basin pure-play Centennial Resources

Silver Run Acquisition Corporation announced today that it completed its acquisition of an 89% controlling interest in Centennial Resource Production, a pure-play Delaware Basin company with 42,500 net acres primarily in Reeves and Ward counties, Texas.

Silver Run acquires Centennial assets

Silver Run bought Centennial from an affiliate of Riverstone Holdings LLC. In connection with the transaction, Silver Run has been renamed Centennial Resource Development, and its common stock and warrants will be traded under the symbols “CDEV” and “CDEVW”, respectively, beginning October 12, the company said in a press release.

The size of the company’s board of directors has been increased from four members to eight members, including Mark G. Papa, Maire A. Baldwin, Karl Bandtel, Pierre F. Lapeyre Jr., David M. Leuschen, Jeffrey H. Tepper, Robert M. Tichio and Tony R. Weber.

Silver Run is headed by former 14-year EOG Resources (ticker: EOG) CEO Mark Papa, who saw the share price of EOG increase 1,000% during his tenure there. Centennial’s existing senior management team led by present CEO Ward Polzin will provide transition services for a period of time while Papa looks to permanently fill management positions.

In connection with the closing of the transaction, Riverstone and certain Riverstone controlled investment funds purchased approximately $810 million of Silver Run Class A Common Stock at $10.00 per share, including $175 million from Riverstone Energy Limited.  In addition, certain funds managed by Capital World Investors and certain funds managed by Fidelity Management and Research Company purchased an aggregate of $200 million of Silver Run Class A Common Stock at $10.00 per share.

The proceeds of both stock sales were used to fund a portion of the cash consideration for the transaction.

Following the closing, Riverstone and its affiliates are the single largest stockholder of Silver Run, with an approximate 51% ownership interest.  NGP has retained an 11% interest in Centennial Resource Production, and has appointed Mr. Tony R. Weber as a director on Silver Run’s board of directors.

CDEV Growth Strategy

At the closing, Centennial Resource Holdings also entered into an amendment to its credit agreement to, among other things (i) permit the transaction, (ii) reflect the repayment in full of all term loans thereunder, (iii) increase the borrowing base from$140,000,000 to $200,000,000, (iv) increase the interest rate to LIBOR plus 2.25% – 3.25%, and (v) require Centennial to have sufficient liquidity and satisfy a maximum leverage ratio in order to make dividends. As of October 11, 2016, Centennial has no outstanding debt and approximately $100 million of cash on hand.

The anticipated initial enterprise value of the combined company is approximately $1.7 billion, implying a multiple of 12.6x and 6.6x projected calendar 2017 and 2018 adjusted EBITDA, respectively, and post-closing equity value of $1.8 billion at $10.00 per share.

Centennial is producing approximately 7.2 MBOEPD from a position with five currently producing shale zones that has the upside for seven more. Reserves are believed to be at 48.6 MMBOE of net proved reserves based on internal estimates. The company reported 1,357 gross identified potential horizontal drilling locations on its acreage.

For additional information, visit the company’s website here.

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