Chevron to acquire shale producer PDC Energy

US major Chevron said May 22 it had reached a definitive agreement to acquire shale producer PDC Energy in a stock and debt deal worth an estimated $7.6bn.

Based on Chevron’s closing price May 19, PDC shareholders will receive 0.4638 Chevron shares for each PDC share, for a total value of $6.3bn, which represents about a 14% premium to PDC’s 10-day average. Adding acquired debt brings the enterprise value of the acquisition to $7.6bn, Chevron said.

With the acquisition, Chevron gains high-quality assets adjacent to its existing position in the Denver-Julesburg (DJ) Basin spanning Colorado and Wyoming, and adds to its 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. “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 deliver about $1bn in annual free cash flow and increase its oil-equivalent proved reserves by about 10% at a cost under $7/barrel of oil equivalent (boe).

In the DJ Basin, 275,000 net acres will add over 1bn boe of proved reserves, while 25,000 acres in the Permian are held by production and will be integrated into Chevron’s existing operations. Chevron holds about 327,000 net acres in the DJ Basin and about 2.2mn net acres in the Permian.

The transaction has been approved by the boards of both companies and is expected to close by year-end, pending approval from PDC shareholders, regulatory approvals and other customary closing conditions.