Chevron to Buy Shale Driller PDC in $6.3 Billion Stock Deal

Deal Will Increase Chevron’s Production by Almost 10%
Signage at the entrance of the Chevron Park campus in San Ramon, Calif.
Signage at the entrance of the Chevron Park campus in San Ramon, Calif. (David Paul Morris/Bloomberg News)

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Chevron Corp. agreed to buy Denver-based oil and gas producer PDC Energy Inc. in a $6.3 billion all-stock deal as it seeks to expand amid what’s expected to be a busy year of mergers and acquisitions in U.S. shale.

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 May 22. The deal will increase Chevron’s production by just under 10% and expand the oil giant’s holdings in the Colorado and West Texas shale basins. Separately May 22, Exxon Mobil Corp. agreed to sell assets in the Williston Basin to Chord Energy for $375 million.

Though a small deal by Chevron’s standards — the price is less than the company’s first-quarter cash flow from operations — PDC falls into CEO Mike Wirth’s strategic plan to grow prudently in areas that fit with its existing assets rather take on large, transformative acquisitions. Chevron was widely praised for buying Noble Energy for $5 billion in a similar bolt-on deal in the midst of the pandemic in 2020 but has come under scrutiny recently about its lack of growth relative to Exxon Mobil Corp.

“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” 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.”


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Chevron will increase its capital expenditure budget by $1 billion per year, after realizing about $400 million in cost savings once the transaction closes by the end of the year, pending regulatory and PDC shareholder approval. Its new global spending range will be $14 billion to $16 billion a year through 2027.

Oil and gas producers are flush with cash after raking in record profits over the past year, leaving the U.S. 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 U.S. shale play.

PDC shares climbed as much as 8.5% before the start of regular trading in New York. Chevron shares fell 0.7%.

The total enterprise value, which includes debt, of the deal is $7.6 billion. PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. Chevron said it expects the tie-up to add about $1 billion in annual free cash flow at $70 per barrel of 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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