Chevron Corporation has signed a deal to buy shale firm PDC Energy in an all-stock transaction valued at $6.3 billion, or $72 per share, the U.S. supermajor said on Monday in what could be an acceleration of deal-making in the shale patch.
The total enterprise value of the deal, including debt, is $7.6 billion.
The transaction price represents a premium of 14% on a 10-day average based on closing stock prices on May 19, 2023, Chevron said.
PDC Energy shares surged by 7.89%, or by $5.14, to over $70 apiece, in pre-market trade on Monday after the agreement was announced.
The transaction has been unanimously approved by the boards of directors of both companies and is expected to close by the end of this year. The acquisition is subject to PDC shareholder approval, to regulatory approvals, and other customary closing conditions.
Through the acquisition of PDC Energy, Chevron will gain high-quality assets adjacent to its positions in the Denver-Julesburg (DJ) and the Permian Basins.
"PDC's attractive and complementary assets strengthen Chevron's position in key U.S. production basins," Chevron chairman and CEO Mike Wirth said in a statement. "This transaction is accretive to all important financial measures and enhances Chevron's objective to safely deliver higher returns and lower carbon."
For the shale producer, the combination with Chevron "is a great opportunity for PDC to maximize value for our shareholders," PDC president and CEO Bart Brookman said.
After the acquisition, Chevron expects to increase capex by around $1 billion per year, raising its guidance range to $14 to $16 billion through 2027, after realizing about $400 million in capex efficiencies post-closing.
The market has been expecting a deal from the supermajors since reports emerged last month of talks about ExxonMobil potentially buying Pioneer Natural Resources.
"All of this seems to point toward an industry that looks increasingly like it did before shale in the context of the biggest companies and majors holding the best, lowest-cost resource," Andrew Dittmar, a Director on the Enverus Intelligence team, wrote last month.
By Charles Kennedy for Oilprice.com
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