Chevron to acquire oil and gas firm PDC Energy for $7.6bn in all-stock deal

Chevron Corporation has signed an all-stock deal to acquire PDC Energy, a Nasdaq-listed oil and gas exploration and production company, for a consideration of $7.6 billion.

The deal values PDC Energy at $72 per share, including debt of $1.3 billion.

In accordance with the agreement, PDC Energy’s shareholders will receive 0.4638 shares of Chevron for each of their shares in the former, based on the latter’s closing price on 19 May 2023.

PDC Energy is engaged in the acquisition, exploration, and development of properties for crude oil, natural gas, and natural gas liquids (NGLs) production. It operates in the Wattenberg Field in Colorado and the Delaware Basin in west Texas.

The company’s operations in the Wattenberg Field primarily focus on the horizontal Niobrara and Codell plays. On the other hand, Chevron’s operations in the Delaware Basin are primarily focused on the horizontal Wolfcamp zones.

Chevron to acquire oil and gas firm PDC Energy for $7.6bn in all-stock deal. Photo courtesy of John R Perry from Pixabay.

Bart Brookman — PDC Energy President and CEO said: “The combination with Chevron is a great opportunity for PDC to maximize value for our shareholders. It provides a global portfolio of best-in-class assets.

“I look forward to blending our highly complementary organizations, and I’m excited that PDC’s assets will help propel Chevron toward our shared goal for a lower carbon energy future.”

By acquiring PDC Energy, Chevron gains access to high-quality assets that are expected to yield higher returns in basins with lower carbon intensity in the US.

Chevron said that PDC Energy brings several advantages, including strong free cash flow, low breakeven production, and development opportunities that complement its existing position in the Denver-Julesburg (DJ) Basin. Additionally, it adds to Chevron’s leading position in the Permian Basin by providing additional acreage.

As a result of the deal, Chevron’s proved reserves will see a 10% increase at an acquisition cost of less than $7 per barrel of oil equivalent (BOE).

In the DJ Basin, Chevron will expand its operations by acquiring 275,000 net acres, which are strategically located and economically viable. This addition will contribute over one billion BOE of proved reserves, enabling the realization of capital and operational synergies.

Furthermore, the deal includes the inclusion of approximately 25,000 net acres in the Permian Basin. These acres are already in production, and their integration into Chevron’s existing capital-efficient development operations will further enhance the company’s capabilities in the area.

Mike Wirth — Chevron Chairman and CEO said: “PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins.

“This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon. We look forward to welcoming PDC’s team and shareholders to Chevron and continuing both companies’ focus on safe and reliable operations.”

The transaction has received unanimous approval from the boards of directors of both companies and is anticipated to be finalized by the end of 2023. It is contingent upon approval from PDC Energy’s shareholders, as well as regulatory approvals, and other customary closing conditions.