- Mergers & Acquisitions
Chevron Corp. to acquire PDC Energy for USD6.3 billion
Chevron Corporation said it has entered into a definitive agreement with PDC Energy, Inc., an independent U.S. oil and gas company, to acquire all of its outstanding shares in an all-stock transaction valued at USD6.3 billion, or USD72 per share.
PDC Energy was founded in Bridgeport, West Virginia, in 1969. For the first 30 years, the company operated exclusively in the Appalachian Basin where it focused on drilling Shallow Upper Devonian gas wells. In 1999, PDC greatly expanded its range of operations by entering the Wattenberg Field and Piceance Basin of Colorado as well as other basins, where the company continued to focus on developing low-risk, predominately natural gas-focused assets. In 2009, PDC moved its corporate headquarters to Denver, Colorado.
The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close by year-end 2023. The acquisition is subject to PDC shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of 14% on a 10-day average based on closing stock prices on May 19, 2023.
Based on Chevron’s closing price on May 19, 2023 and under the terms of the agreement, PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. The total enterprise value, including debt, of the transaction is USD7.6 billion.
The acquisition of PDC provides Chevron with high-quality assets expected to deliver higher returns in lower carbon intensity basins in the United States. PDC brings 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.
The acquisition increases Chevron’s proved reserves by 10% at an acquisition cost under USD7 per barrel of oil equivalent (BOE), the San Ramon, California, U.S.A.-based energy major said.
“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” said Chevron Chairman and CEO Mike Wirth. “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 combination with Chevron is a great opportunity for PDC to maximise value for our shareholders. It provides a global portfolio of best-in-class assets,” said Bart Brookman, PDC president and CEO. “I look forward to blending our highly complementary organisations, and I’m excited that PDC’s assets will help propel Chevron toward our shared goal for a lower carbon energy future.”
Morgan Stanley & Co. LLC is acting as lead financial advisor to Chevron. Evercore also advised Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. J.P. Morgan Securities LLC is acting as lead financial advisor to PDC Energy and provided a fairness opinion to the Board of Directors. Wachtell, Lipton, Rosen & Katz and Davis Graham & Stubbs are jointly serving as the company’s legal counsel. PJT Partners also advised PDC Energy.