Chevron Corp. has concluded the full acquisition of PDC Energy Inc., adding Denver-Julesburg (DJ) and Permian basin assets to its oil and gas inventory.
“PDC’s high-quality assets open up even greater opportunities in important U.S. basins where Chevron already has a strong presence”, Chevron said in a press release Monday.
The purchase gives the global energy giant 275,000 net acres in the Denver-Julesburg Basin, next to assets already operated by Chevron, and 25,000 net acres in the Permian Basin, where Chevron already has a “leading position”, according to the announcement of the merger deal March 22.
Chevron estimates the DJ acreage holds over one billion barrels of oil equivalent in proved reserves “in highly economic locations”, the March announcement said, adding the assets would “enable capital and operational synergies”.
Chevron was to pay $6.3 billion in the all-stock transaction, or $72 per share, according to the March media release.
“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 disclosure stated. “The total enterprise value, including debt, of the transaction is $7.6 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”, San Ramon, California-based Chevron said in the March announcement. “PDC brings strong free cash flow, low breakeven production and development opportunities adjacent to Chevron’s position in the Denver-Julesburg Basin, as well as additional acreage to Chevron’s leading position in the Permian Basin.”
PDC chief executive Bart Brookman said then, “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 new assets have raised Chevron’s planned capital expenditure by about $1 billion per year or $14-16 billion through 2027, according to the March announcement.
As part of the agreement, Chevron will absorb the debt obligations of PDC, according to the March announcement. Last week Chevron launched an offer to exchange bonds issued by PDC for bonds to be awarded by Chevron USA Inc (CUSA).
The exchange involves “all validly tendered (and not validly withdrawn) and accepted 5.750 percent Senior Notes due 2026 issued by PDC Energy, Inc. for 5.750 percent Senior Notes due 2026 to be issued by CUSA and fully and unconditionally guaranteed by Chevron”, Chevron said August 3.
Chevron is offering $970 per $1,000 of the principal amount of the PDC notes. The PDC notes have an aggregate value of $750 million.
The completion of the acquisition came earlier than expected. The March announcement said the closure was expected by yearend.
Chevron, trading on the New York Stock Exchange, ended Monday at $159.89 from last week’s closing price of $159.31.
PDC Financial Prospects
Denver, Colorado-based PDC had total liabilities of $3.94 billion including a long-term debt of $1.51 billion as of the end of the second quarter, according to its quarterly filing with the Securities and Exchange Commission. Its total assets stood at $8.36 billion including $10.2 million in cash and cash equivalents as of end-June.
PDC posted $288.71 million in net profit, or $3.28 in earnings per diluted share, for the period. When adjusted for extraordinary or non-recurring items, net income becomes $237 million. It collected $856.12 million in net cash from operations.
It produced 25.8 million barrels of oil equivalent in the April-June quarter, 8.5 million barrels of which were crude oil.
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