Centennial Resource Development Inc. executives said the firm ramped up oil production and capitalized on high commodity prices in the second quarter, putting it in an enviable position as it nears the close of a $7 billion merger of equals.

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The Denver-based company, focused mostly in the Permian Basin, agreed in May to a tie-up with Colgate Energy Partners III LLC in a deal slated to close as soon as this quarter.  

Centennial reported second-quarter oil production averaged 36,696 b/d, up from 31,912 b/d in the prior-year period. Total production during the quarter averaged 70,240 boe/d, up from 61,647 boe/d.

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“This provides us with very strong operational and financial momentum headed into the combination with Colgate Energy,” Centennial CEO Sean Smith said during an Aug. 4 earnings call after the company posted quarterly results.

Natural gas output rose to 120,225 Mcf/d from 116,629 Mcf/d, and natural gas liquids (NGL) production totaled 13,507 b/d, up from 10,297 b/d.

Second quarter average daily crude and total production increased 12% and 14%, respectively, quarter/quarter. The increases are in line with the company’s target of 10-15% production growth this year.

Smith said the shareholder vote on the merger is scheduled for Aug. 29, “and we expect to close shortly thereafter,” assuming shareholders’ give a collective thumbs up.

“Overall, I’m very pleased with the tremendous progress that’s been made since the announcement,” Smith added. “Both the Centennial and Colgate teams have made significant progress on the merger integration so that the new company will hit the ground running on day one.”

A new company name is to be announced by the closing date, Centennial said. The combined company would be based in Midland, TX. At the current drilling pace, it would have more than 15 years of inventory.

Smith is slated to become executive chair of the combined company, with Colgate’s co-CEOs Will Hickey and James Walter retaining their titles following closing.  

Centennial management said the deal would create the largest pure-play exploration and production company in the Delaware Basin of the Permian.

The deal comes amid a surge in the prolific region. The Permian Delaware is on track to hit record average production of 5.7 million boe/d in 2022, Rystad Energy analysts said. They estimated total production in the Delaware would grow by about 990,000 boe/d this year.

For the second quarter, Centennial said its total revenue increased by 36% to $473 million, with a 33% increase in oil revenue, a 74% spike in natural gas revenue and a 21% increase in NGL revenue. Demand and prices across all three were up notably during the quarter.

CFO George Glyphis said that, during the second quarter, Centennial incurred $141 million of total capital expenditures (capex), with drilling, completion and facilities costs accounting for the vast majority of the total. It marked a notable increase from the previous quarter, when capex was $114.7 million.

Centennial reported second-quarter net income of $191.8 million (67 cents/share) compared to a net loss of $25.1 million (minus 9 cents) in the prior-year period.