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

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.

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About Joe Palmisano

Joe Palmisano is Editorial Director for Connect Money, where he brings nearly three decades experience of market insights as a financial journalist, analyst and senior portfolio manager for leading financial publications, advisory firms, and hedge funds. In his role as Editorial Director, Joe is responsible for the selection of content and creation of daily business news covering the financial markets, including Alternative Assets, Direct Investment and Financial Advisory services. Before joining Connect Money, Joe was a financial journalist for the Wall Street Journal, regularly publishing feature stories and trend pieces on the foreign exchange, global fixed income and equity markets. Joe parlayed his experience as a financial journalist into roles as a Senior Research Analyst and Portfolio Manager, writing daily and weekly market analysis and managing a FX and US equity portfolio. Joe was also a contributing writer for industry magazines and publications, including SFO Magazine and the CMT Association. Joe earned a B.S.B.A. in Finance from The American University. He holds the Chartered Market Technician (CMT) designation and is a member of the CFA Institute.

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