M&A: PDCE is being sold to Chevron
Posted: Mon May 22, 2023 8:55 am
PDC Energy is one of the companies in our High Yield Income Portfolio. PDCE spiked up to $70 on the news. My current valuation is $103, so Chevron got a very good company for a bargain price.
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(Bloomberg) -- Chevron Corp. said it will buy driller PDC Energy Inc. in a $6.3 billion all-stock deal, allowing Chevron
to expand its holdings in shale basins in Colorado and West Texas. < Over 80% of PDC's value is in the DJ Basin.
Chevron will pay $72 a share, a roughly 14% premium on a 10-day average based on May 19 closing prices, according to a
statement Monday. PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. The deal is expected to close by
year-end, pending regulatory approval and PDC shareholder approval.
“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” Chevron CEO
Mike Wirth said in the statement. “This transaction is accretive to all important financial measures and enhances Chevron’s
objective to safely deliver higher returns and lower carbon.
Drillers Seek New Land
Oil and gas producers are flush with cash after raking in record profits over the past two years, leaving the US energy
patch ripe for a takeover boom. Companies are looking to bulk up and consolidate, particularly in the Permian Basin of West Texas
and New Mexico, the most prolific US shale play.
The total enterprise value of the Chevron-PDC deal including debt is $7.6 billion. Chevron said it expects the tie-
up to add about $1 billion in annual free cash flow at $70 per barrel Brent oil and Henry Hub natural gas at $3.50 per thousand
cubic feet. Morgan Stanley and Evercore advised Chevron, while JPMorgan advised PDC.
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IMO the other four large-cap upstream companies in our High Yield Income Portfolio (CTRA, DVN, FANG and PXD) are possible takeover targets because of how much free cash flow they are generating and they all have very clean balance sheets.
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(Bloomberg) -- Chevron Corp. said it will buy driller PDC Energy Inc. in a $6.3 billion all-stock deal, allowing Chevron
to expand its holdings in shale basins in Colorado and West Texas. < Over 80% of PDC's value is in the DJ Basin.
Chevron will pay $72 a share, a roughly 14% premium on a 10-day average based on May 19 closing prices, according to a
statement Monday. PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. The deal is expected to close by
year-end, pending regulatory approval and PDC shareholder approval.
“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” Chevron CEO
Mike Wirth said in the statement. “This transaction is accretive to all important financial measures and enhances Chevron’s
objective to safely deliver higher returns and lower carbon.
Drillers Seek New Land
Oil and gas producers are flush with cash after raking in record profits over the past two years, leaving the US energy
patch ripe for a takeover boom. Companies are looking to bulk up and consolidate, particularly in the Permian Basin of West Texas
and New Mexico, the most prolific US shale play.
The total enterprise value of the Chevron-PDC deal including debt is $7.6 billion. Chevron said it expects the tie-
up to add about $1 billion in annual free cash flow at $70 per barrel Brent oil and Henry Hub natural gas at $3.50 per thousand
cubic feet. Morgan Stanley and Evercore advised Chevron, while JPMorgan advised PDC.
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IMO the other four large-cap upstream companies in our High Yield Income Portfolio (CTRA, DVN, FANG and PXD) are possible takeover targets because of how much free cash flow they are generating and they all have very clean balance sheets.