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Two oil-and-gas producers that operate in Colorado—

Bonanza Creek Energy Inc.

BCEI 7.67%

and

Extraction Oil & Gas Inc.

XOG 7.37%

—said Monday that they are combining into a company valued at about $2.3 billion.

The all-stock, no-premium merger of companies that produce in Colorado’s Denver-Julesburg Basin is the latest example of regional consolidation in U.S. oil and gas fields, as the energy industry emerges from the Covid-19 pandemic.

The combined company will be renamed Civitas Resources Inc. and become the largest pure-play oil-and-gas company in the DJ Basin. Bonanza and Extraction shareholders will respectively own 50% of the new company. The Wall Street Journal had reported the expected deal earlier on Monday.

The tie-up follows shale-gas producer

EQT Corp.’s

agreement last week to scoop up the assets of smaller rival, Alta Resources Development LLC, for $2.9 billion in cash and stock, which will expand its northeastern U.S. footprint. EQT, the largest U.S. natural gas producer, said in October that it would purchase upstream and midstream assets from

Chevron Corp.

for $735 million, also in the Northeast.

In Texas,

Pioneer Natural Resources Co.

last month agreed to spend $6.4 billion to purchase DoublePoint Energy, a private operator with acreage close to Pioneer’s in the Permian Basin of West Texas and New Mexico.

That deal came months after Pioneer, led by Chief Executive

Scott Sheffield,

closed a transaction purchasing Parsley Energy Inc., another Permian producer co-founded by Mr. Sheffield’s son, Bryan, in a deal valued at $4.5 billion.

In recent years, following a crash in oil prices in 2015, shale drillers have bought smaller rivals for much lower premiums than they had in the first half of the last decade. Extraction and Bonanza Creek, both based in Denver, were valued roughly the same on the stock market Friday, with market capitalizations of $1.12 billion and $1.15 billion, respectively.

Once combined, the companies plan to lift Bonanza Creek’s annual dividend about 14% to $1.60 per share. Civitas’s production will be equivalent to 117,000 barrels of oil equivalent a day, over 430,000 net acres. By combining, Civitas would generate at least $25 million in annual savings, a person familiar with the matter said.

Bonanza Creek Chief Executive

Eric Greager

will serve as CEO of Civitas, while

Ben Dell,

chairman of Extraction, will become chairman of the new company, the person said. Mr. Dell is also managing partner at investment firm Kimmeridge Energy, which owns about 38% of Extraction.

Extraction emerged from chapter 11 bankruptcy in January after filing last summer during the pandemic. Bonanza Creek had filed and emerged from chapter 11 bankruptcy in 2017, following a previous downturn in oil prices.

Write to Collin Eaton at collin.eaton@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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