Centennial Resource Development, Inc. (NASDAQ: CDEV) (the “Company”
or “Centennial”) today announced the pricing of a public offering
of $150,000,000 aggregate principal amount of 3.25% exchangeable
senior notes due 2028 (the “notes”) of its wholly owned operating
subsidiary, Centennial Resource Production, LLC (“CRP”). The notes
will be fully and unconditionally guaranteed, on a senior,
unsecured basis, by Centennial and its subsidiaries that currently
guarantee CRP’s outstanding senior notes. The issuance and sale of
the notes are scheduled to settle on March 19, 2021, subject to
customary closing conditions. CRP also granted the underwriters of
the notes a 30-day option to purchase up to an additional
$22,500,000 principal amount of notes, solely to cover
over-allotments.
The notes will be senior, unsecured obligations
of CRP and will accrue interest at a rate of 3.25% per annum,
payable semi-annually in arrears on April 1 and October 1 of each
year, beginning on October 1, 2021. The notes will mature on April
1, 2028, unless earlier repurchased, redeemed or exchanged. Before
January 3, 2028, noteholders will have the right to exchange their
notes only upon the occurrence of certain events. From and after
January 3, 2028, noteholders may exchange their notes at any time
at their election until the close of business on the second
scheduled trading day immediately before the maturity date. CRP
will settle exchanges by paying or delivering, as applicable, cash,
shares of Centennial’s Class A common stock, par value $0.0001 per
share (the “common stock”), or a combination of cash and shares of
Centennial’s common stock, at CRP’s election. The initial exchange
rate is 159.2610 shares of common stock per $1,000 principal amount
of notes, which represents an initial exchange price of
approximately $6.28 per share of common stock. The initial exchange
price represents a premium of approximately 30.0% over the last
reported sale price of $4.83 per share of Centennial’s common stock
on March 16, 2021. The exchange rate and exchange price will be
subject to adjustment upon the occurrence of certain events.
The notes will be redeemable, in whole or in
part (subject to certain limitations), for cash at CRP’s option at
any time, and from time to time, on or after April 7, 2025 and on
or before the 40th scheduled trading day immediately before the
maturity date, but only if the last reported sale price per share
of Centennial’s common stock exceeds 130% of the exchange price for
a specified period of time. The redemption price will be equal to
the principal amount of the notes to be redeemed, plus accrued and
unpaid interest, if any, to, but excluding, the redemption
date.
If a “fundamental change” (as defined in the
indenture for the notes) occurs, then, subject to limited
exceptions, noteholders may require CRP to repurchase their notes
for cash. The repurchase price will be equal to the principal
amount of the notes to be repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the applicable repurchase
date.
CRP estimates that the net proceeds from the
offering will be approximately $144.5 million (or approximately
$166.3 million if the underwriters fully exercise their option to
purchase additional notes), after deducting the underwriting
discounts and commissions and estimated offering expenses. CRP
intends to use the net proceeds to redeem all of its outstanding
8.00% second lien senior secured notes due 2025, including the
payment of accrued and unpaid interest thereon. CRP intends to use
the remainder of the net proceeds from the offering to fund the
cost of entering into the capped call transactions described below
of approximately $13.0 million. If the underwriters exercise their
option to purchase additional notes, then CRP intends to use a
portion of the additional net proceeds to fund the cost of entering
into additional capped call transactions as described below, as
well as to repay additional outstanding borrowings under its
revolving credit facility.
In connection with the pricing of the notes, CRP
and Centennial entered into privately negotiated capped call
transactions with certain of the underwriters and/or their
respective affiliates and/or other financial institutions (the
“option counterparties”). The capped call transactions will cover,
subject to customary adjustments, the number of shares of common
stock initially underlying the notes. The capped call transactions
are expected generally to reduce potential dilution to Centennial’s
common stock upon exchange of the notes and/or at CRP’s election
(subject to certain conditions) offset any cash payments CRP is
required to make in excess of the aggregate principal amount of
exchanged notes, as the case may be, with such reduction or offset
subject to a cap. The cap price of the capped call transactions
will initially be approximately $8.45, which represents a premium
of 75.0% over the last reported sale price of Centennial’s common
stock of $4.83 per share on March 16, 2021, and is subject to
certain adjustments under the terms of the capped call
transactions. If the underwriters exercise their option to purchase
additional notes, CRP and Centennial expect to enter into
additional capped call transactions with the option
counterparties.
In connection with establishing their initial
hedges of the capped call transactions, the option counterparties
or their respective affiliates expect to enter into various
derivative transactions with respect to Centennial’s common stock
concurrently with or shortly after the pricing of the notes. This
activity could increase (or reduce the size of any decrease in) the
market price of Centennial’s common stock or the notes at that
time. In addition, the option counterparties or their respective
affiliates may modify their hedge positions by entering into or
unwinding various derivatives with respect to Centennial’s common
stock and/or purchasing or selling Centennial’s common stock or
other securities issued by the Company in secondary market
transactions following the pricing of the notes and prior to the
maturity of the notes (and are likely to do so on each exercise
date of the capped call transactions or following any repurchase,
redemption or early exchange of the notes, in each case if we
exercise our option to terminate the relevant portion of the capped
call transactions). This activity could also cause or avoid an
increase or a decrease in the market price of Centennial’s common
stock or the notes, which could affect a noteholder’s ability to
exchange the notes and, to the extent the activity occurs during
any observation period related to an exchange of the notes, it
could affect the number of shares, if any, and value of the
consideration that a noteholder will receive upon exchange of the
notes.
In addition, if any such capped call transaction
fails to become effective, whether or not the offering of the notes
is completed, the option counterparty party thereto may unwind its
hedge positions with respect to Centennial’s common stock, which
could adversely affect the value of Centennial’s common stock and,
if the notes have been issued, the value of the notes.
Citigroup Global Markets Inc., J.P. Morgan
Securities LLC and Jefferies LLC are acting as book-running
managers for the offering.
The offering is being made pursuant to an
effective shelf registration statement on file with the Securities
and Exchange Commission (the “SEC”). The offering will be made only
by means of a prospectus supplement and an accompanying prospectus.
An electronic copy of the preliminary prospectus supplement (and,
when available, the final prospectus supplement), together with the
accompanying prospectus, is or will be available on the SEC’s
website at www.sec.gov. Alternatively, copies of these documents
can be obtained by contacting: Citigroup Global Markets Inc., c/o
Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood,
New York 11717, or by telephone: (800) 831-9146; J.P. Morgan
Securities LLC, c/o Broadridge Financial Solutions, 1155 Long
Island Avenue, Edgewood, NY 11717, or by telephone at (866)
803-9204; or Jefferies LLC at 520 Madison Avenue, 12th Floor, New
York, NY 10022, Attention: Prospectus Department, or by telephone
at (877) 547-6340 or by email to
Prospectus_Department@Jefferies.com.
This press release does not constitute an offer
to sell, or the solicitation of an offer to buy, any securities
referred to in this press release, nor will there be any sale of
any such securities, in any state or other jurisdiction in which
such offer, sale or solicitation would be unlawful prior to
registration or qualification under the securities laws of such
state or jurisdiction.
About Centennial Resource Development,
Inc.
Centennial is an independent oil and natural gas
company focused on the development of unconventional oil and
associated liquids-rich natural gas reserves in the Permian Basin.
The Company’s assets and operations, which are held and conducted
through CRP, are concentrated in the Delaware Basin, a sub-basin of
the Permian Basin.
Forward-Looking Statements
The information in this press release includes
“forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical fact included in this press release
are forward-looking statements. When used in this press release,
the words “could,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project,” “goal,” “plan,” “target” and similar
expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such
identifying words. These forward-looking statements are based on
management’s current expectations and assumptions about future
events and are based on currently available information as to the
outcome and timing of future events.
The Company cautions you that these
forward-looking statements are subject to a variety of risks and
uncertainties, most of which are difficult to predict and many of
which are beyond the Company’s control. Important information about
issues that could cause actual results and plans to differ
materially from those expressed in any forward-looking statements
can be found in the Company’s public periodic filings with the SEC,
including in the Company’s Annual Report on Form 10-K. All
forward-looking statements, expressed or implied, included in this
press release are expressly qualified in their entirety by this
cautionary statement. This cautionary statement should also be
considered in connection with any subsequent written or oral
forward-looking statements that the Company or persons acting on
its behalf may issue.
Except as otherwise required by applicable law,
the Company disclaims any duty to update any forward-looking
statements, all of which are expressly qualified by the statements
in this section, to reflect events or circumstances after the date
of this press release.
Contact:
Hays MabryDirector, Investor Relations(832)
240-3265ir@cdevinc.com
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