Chevron to acquire PDC Energy in $6.3 billion all-stock deal
13 Jul 2023
According to reports, US-based Chevron Corporation — one of the top oil & gas firms in the world — has signed a definitive agreement with PDC Energy, an energy production firm, to acquire all of PDC Energy’s outstanding shares in an all-stock deal with an estimated value of US$6.3 billion (US$ 72 per share).
As per the agreement, each PDC share is valued at US$0.4638 of Chevron. This is what the shareholders of PDC will get for every PDC share that they own after the all-stock deal acquisition is done by Chevron. The total enterprise value of the transaction, including debt, is US$7.6 billion.
This acquisition is expected to expand Chevron Corporation’s overall assets, boost its ROI, and help it focus on its goal of being complaint with low carbon production.
Strong cash flows, low break-even production and growth opportunities in the Denver-Julesburg Basin and the Permain Basin are some of the key gains from this deal for Chevron.
According to reports, Chevron CEO & chairman Mike Worth said he was happy with the deal. He said, “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.”
The PDC president and CEO Bart Brookman had this to say: “The combination with Chevron is a great opportunity for PDC to maximize value for our shareholders. It provides a global portfolio of best-in-class assets. I look forward to blending our highly complementary organizations, and I’m excited that PDC’s assets will help propel Chevron toward our shared goal for a lower carbon energy future.”
The other top highlights of this US$6.3 billion deal are:
- The transaction will be accretive to all the prime financial measures within the first year after the deal closes, Chevron hopes.
- Chevron hopes to add US$ 1 billion in annual free cash flow at US$ 70 per barrel Brent, and US$ 3.50 per mcf Henry Hub.
- The proposed acquisition will boost Chevron’s proven reserves by 10% (at an acquisition cost under US$ 7 per barrel of oil equivalent, or BOE).
- Chevron hopes that its new presence in the DJ Basin (275,000 net acres of land) adjacent to its existing operations will yield financial and operational synergies for Chevron Corporation.
- Chevron hopes to integrate its existing capital-efficient development operations with the 25,000-acre Permain Basin, which is under production.
- Chevron hopes to boost its capex by US$ 1 billion per year.
- After the successful closure of this all-stock deal, Chevron anticipates issuing approximately about 45 million shares of common stock.
- The total transaction value of US$ 7.6 billion includes a net debt component. The transaction is expected to close by the end of 2023.