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Chevron (CVX) Set to Purchase PDC Energy for $6.3B
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Chevron Corp. has finalized the acquisition of PDC Energy Inc.'s land holdings in the Denver-Julesburg and Permian basins.
Chevron Corporation (CVX) has announced its intention to acquire PDC Energy, Inc. (PDCE) in an all-stock deal valued at $6.3 billion. Under the agreement terms, PDC stockholders will receive 0.4638 Chevron shares for each PDCE share, bringing the total enterprise value to $7.6 billion, inclusive of debt. The acquisition is seen as a strategic step to enhance Chevron's position in vital U.S. production basins, unlocking new opportunities and potentially driving higher returns.
As part of the agreement, Chevron will issue around 41 million shares of common stock at the deal's closure. Both Chevron's and PDC Energy's boards of directors have unanimously approved the acquisition.
The transaction is projected to conclude by the end of 2023, pending approval from PDCE shareholders, regulatory bodies, and satisfaction of customary closing conditions. This purchase emphasizes Chevron's determination to consolidate its presence in vital U.S. production basins, focusing on delivering greater returns and reducing carbon emissions.
Advantages
- Denver-Julesburg (DJ) Basin Benefits: Strong free cash flow, low breakeven production, development potential near existing operations.
- Permian Basin Expansion: Additional acreage, strengthening Chevron's position in a highly productive oil and gas region.
- Financial Advantages: Expected increase in earnings, free cash flow, and return on capital employed; accretive to all key financial measures within the first year.
- Projected Cash Flow: Approximately $1 billion in annual free cash flow, based on future prices.
Strategic Roadmap
The acquisition is in line with Chevron's strategic goals, promising to enhance the company's proved reserves by 10% at a cost of less than $7 per barrel of oil equivalent (BOE).
In the DJ Basin, CVX will acquire 275,000 net acres, adding over 1 billion BOE of proved reserves in economically attractive areas. This growth is projected to enable both capital and operational synergies as Chevron assimilates PDC's assets with its current operations.
In the Permian Basin, CVX will add 25,000 net acres that are under production. Recognized for their operational efficiency, these acres are expected to bolster Chevron's regional development endeavors.
Chevron's Projections Post-Acquisition
The acquisition is poised to enhance Chevron's capital and cost efficiency. The company foresees an increase in capital expenditures by roughly $1 billion annually, adjusting its guidance to a range of $14-$16 billion through 2027.
Post-transaction, CVX aims to realize about $400 million in efficiencies related to capital expenditure and projects approximately $100 million in run-rate cost synergies before tax within the first year of closing. These synergistic effects are expected to augment both the operational efficiency and financial robustness of the merged entity.
Chevron's purchase of PDC Energy is a significant step in enlarging its asset base, enhancing financial outcomes, and affirming its dedication to sustainability. This groundbreaking transaction is slated to fuel Chevron's future growth by harnessing PDCE's synergies in promising basins that feature low carbon intensity.
Chevron (CVX), one of the world's largest publicly traded oil and gas corporations, functions across two main segments — Upstream and Downstream.
PDC Energy (PDCE) is a U.S.-based independent exploration and production firm that specializes in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids. Established in 1969, the company is headquartered in Denver, CO.
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Chevron Announces Intent to Divest Oil and Gas Properties in New Mexico and Texas
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According to Reuters, Chevron has recently made additional assets available for acquisition in both New Mexico and Texas. As part of its strategy to streamline operations following significant shale acquisitions, Chevron is reportedly offering multiple oil and gas properties for sale in New Mexico and Texas. Marketing documents reviewed by Reuters reveal the company's intention to divest these assets. Despite its prominent position as the largest publicly-traded oil and gas producer and property owner with 2.2 million acres in the Permian Basin of West Texas and New Mexico, Chevron has been actively divesting properties in the region. This divestment aligns with Chevron's efforts to optimize its portfolio and focus on its core operations.
SM Energy Acquires 20,000 Acres in Texas for $90.6M
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SM Energy acquired 20,000 net acres in Dawson and north Martin counties in Texas, completing the transaction in cash. SM Energy Co., based in Denver, intends to expand on its success from the second quarter by increasing its drilling and completion activities in the coming quarter. This plan also includes preparations to develop the newly acquired land in the Midland basin. In June, the company's president and CEO, Herb Vogel, along with his team, raised their target for total oil and gas production for the second quarter to 13.9 MMboe, up from 13.4 MMboe. They exceeded this target, reaching nearly 14.1 MMboe, with oil making up 42% of that figure. During the quarter, SM Energy drilled 17 wells, with 12 located in South Texas and five in the Midland basin. They also completed 25 wells, 17 of which were in the Midland basin.
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Rangeland Energy has agreed to sell Rangeland Midstream Canada to Kingston Midstream Alberta and remains committed to future Canadian midstream investments. Texas-based Rangeland Energy, supported by financial partner EnCap Flatrock Midstream, has inked a deal to sell its Canadian subsidiary, Rangeland Midstream Canada Ltd., to Calgary's Kingston Midstream Alberta Ltd. for cash.
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The merger between ONEOK and Magellan received approval from Magellan shareholders, securing just 55% of the total votes at Magellan’s meeting on Sept. 21. ONEOK Inc. has successfully concluded the acquisition of Magellan Midstream Partners LP on Sept. 25. The deal will bring together their respective assets and expertise, resulting in a powerful entity boasting an extensive network of approximately 25,000 miles of pipelines primarily focused on transporting liquids.
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Viper Energy's deal, comprised of cash and equity, secures an additional 2,800 net royalty acres in the Midland Basin and 1,800 in the Delaware Basin. Viper Energy Partners LP, a Diamondback Energy Inc. subsidiary, has inked a deal to acquire mineral and royalty interests in the Permian Basin. The deal, valued at around $1 billion, is with Warwick Capital Partners and GRP Energy Capital. Viper was established by Diamondback with the purpose of owning, purchasing, and capitalizing on oil and natural gas assets in North America, specifically targeting mineral and royalty interests.