Chevron Corp revealed that it would acquire PDC Energy Inc (NASDAQ:PETD) in an all-stock deal for the total enterprise value, including debt of $7.6 billion, bolstering the energy company’s position in key US production basins.
The San Ramon, California-based oil and gas giant said that it would issue 0.4638 Chevron shares, worth $72 based on Friday’s closing price of $155.23, for each share of Denver-based PDC. It equates to a nearly 11% premium to Friday’s closing price of $65.12.
The PDC acquisition gives Chevron high-quality assets expected to deliver higher returns in lower carbon-intensity basins in America. The oil giant said PDC brings “strong free cash flow, low breakeven production and development opportunities” adjacent to Chevron’s position in the Denver-Julesburg Basin, as well as additional acreage to Chevron’s leading position in the Permian Basin.
"PDC’s attractive and complementary assets strengthen Chevron’s position in key US production basins," Chevron CEO Mike Wirth said in a statement.
"This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon."
Chevron expects the transaction to be accretive to all key financial measures within the first year after closing and to add about $1 billion in annual free cash flow at $70 per barrel Brent; and $3.50 per Mcf Henry Hub.
The PDC deal would add 10% to its oil-equivalent proved reserves for under $7 a barrel and 275,000 net acres adjacent to its position in the Denver-Julesburg Basin, along with 25,000 net acres in the prolific Permian Basin, the largest US oil field, it added.
Chevron said it would issue roughly 41 million shares in the deal, slated to close by the end of the year.
"The combination with Chevron is a great opportunity for PDC to maximize value for our shareholders. It provides a global portfolio of assets," said PDC Energy CEO Bart Brookman.
Chevron shares declined slightly to $153.60, while investors sent PDC Energy shares racing over 8% to $70.38 in morning trade on the Nasdaq.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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