Update on PDCE + SRCI merger - Dec 13

[dan_s]

https://www.bizjournals.com/denver/news ... yptr=yahoo

As I have posted here before, this merger makes a lot of sense. It will create the 3rd largest oil & gas producer in Colorado's DJ Basin with over 200,000 Boepd when the deal closes and moving to over 220,000 Boepd by mid-2020.

My valuation today of PDCE is more than double the current share price and my valuation will go up post-closing just because of the risk of the deal not closing goes away.

I have posted a "Pro Forma" forecast/valuation model for PDCE that assumes that the all-stock merger closes in January. Keep in mind that the actual closing date for all-stock mergers doesn't matter. When the deal closes a lot of the Wall Street Gang will need to take a hard look at PDCE and they are definitely going to be impressed by the numbers. PDC Energy should generate $5.38 earnings per share and $17.00 of operating cash flow per share in 2020 if WTI averages $60/bbl; numbers that support a much higher share price than where PDCE is trading today. If WTI averages $55/bbl it will lower 2020 EPS by about 50 cents.