Chevron boosts shale holdings with $6.3bn PDC buy

Chevron agreed to buy US independent oil and gas producer PDC Energy in an all-stock deal for $6.3bn, a move that shores up its shale acreage in Colorado and west Texas.

The US oil major is paying $72/share for Denver-based PDC, equivalent to a 14pc premium on a 10-day average based on last week's closing stock prices.

The acquisition will increase Chevron's proved reserves by 10pc at an acquisition cost of under $7/bl of oil equivalent (boe).

The deal hands Chevron 275,000 net acres in the DJ basin of Colorado and Wyoming, as well as 25,000 net acres in the Permian basin of west Texas and eastern New Mexico.

Buoyed by record profits, the US oil and gas industry is seen by analysts as ripe for a renewed bout of consolidation, with the Permian at the forefront.

Last month, Chevron said it had no plans to hold onto all of its $15.7bn in cash built up during last year's run-up in oil prices. The company was the first to make a major acquisition after the pandemic, with the $5bn purchase of Noble Energy in July 2020.

"PDC's attractive and complementary assets strengthen Chevron's position in key US production basins," chief executive officer Mike Wirth said.

The transaction, which has already been approved by the boards of both companies, will add about $1bn to annual free cash flow for Chevron.

As a result of the acquisition, Chevron expects to boost capital expenditure by around $1bn a year, raising its guidance range to $14bn-$16bn through 2027. It anticipates savings of about $400mn.

The deal, which is expected to close before the end of the year, is valued at $7.6bn including debt.

By Stephen Cunningham

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