Chevron to Expand Oil and Gas Production with $7.6B PDC Energy Deal

Chevron agreed to buy independent oil-and-gas company PDC Energy in a $6.3 billion stock deal that further fuels the energy giant’s operations at a pair of US shale basins – Denver-Julesburg Basin in Colorado and the Permian Basin in West Texas.

Based on Chevron’s closing price on May 19, the company will pay $72 per share, or about a 14% premium on a 10-day average. PDC shareholders will receive 0.4638 shares of Chevron per PDC share. The total enterprise value, including debt, is $7.6 billion.

“PDC’s attractive and complementary assets strengthen Chevron’s position in key US production basins. This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon,” Chevron Chairman and CEO Mike Wirth said.

Chevron said it would see benefits from the deal within the first year, adding $1 billion in free cash flow assuming $70 per barrel of Brent and Henry Hub natural gas at $3.50 per thousand cubic feet. It increases Chevron’s reserves by 10%, at a cost of less than $7 per barrel.

The US energy sector is primed for a takeover frenzy as oil and gas firms are swimming in cash after two years of record profits. Particularly in the Permian Basin and New Mexico, the most productive US shale play, businesses are looking to grow and consolidate.