Chevron (CVX) said Monday it would buy energy exploration and production company PDC Energy (PDCE) for $6.3 billion.
Chevron said the purchase values PDC Energy shares at $72, a 10.8% premium over their closing price on Friday. It added that PDC investors would receive 0.46 Chevron shares for every PDC share held. Including debt, the total enterprise value of the takeover would be $7.6 billion.
"PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins," said Chevron CEO Mike Wirth. PDC has operations in the Wattenberg Field in Colorado, adjacent to Chevron’s Denver-Julesburg Basin site, and the Delaware Basin in West Texas.
Chevron anticipates the transaction will benefit all key financial measures within the first year after closing. It indicated PDC will add about $1 billion in annual free cash flow for oil (assuming Brent crude prices of $70 per barrel) and $3.50 per thousand cubic feet of Henry Hub gas (based on 2024 futures prices in May). The companies expect the deal to be finalized by the end of this year.
PDC Energy shares rose 9%, while Chevron shares fell 0.5%. Year-to-date, shares of the former are up just over 3%, outperforming an 8% loss for the broader energy sector over the same period. Chevron shares are down 12% year-to-date, underperforming the broader sector.