Chevron has struck a deal to acquired PDC Energy for a total of $7.6 billion, including debt.
Chevron said it would carry out the deal using its own stock, with the issue of 41 million shares. Both boards have approved the deal. They expect it to close by the end of 2023.
The buyer said PDC offered “strong free cash flow, low breakeven production and development opportunities adjacent to Chevron’s position in the Denver-Julesburg (DJ) Basin, as well as additional acreage to Chevron’s leading position in the Permian Basin”.
Announcing the deal, Chevron said it also expected to increase capital expenditure by $1bn per year, raising guidance to $14-16bn.
Chevron chairman and CEO Mike Wirth said PDC was “attractive and complementary” to his company’s position in the US. “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.”
PDC president and CEO Bart Brookman welcomed the deal as a way to “maximise value for our shareholders. It provides a global portfolio of best-in-class assets”. The two companies will work together “toward our shared goal for a lower carbon energy future”.
The deal is contingent on approval from PDC shareholders and certain other regulatory approvals. PDC shareholders will receive 0.4638 Chevron shares for each of their shares.
The deal valued PDC at $6.3 billion, or $72 per share. The company is currently trading at around $65, with the deal offering a 11% premium.
Chevron said it would see benefits from the deal within the first year, adding $1bn in free cash flow at $70 per barrel of Brent. It increases Chevron’s proved reserves by 10%, at a cost of less than $7 per boe.