PDC Energy Inc. completed its acquisition of SRC Energy Inc. on Jan. 14 in an all-stock merger worth about $1.7 billion, including the assumption of debt.

The two Denver-based independent E&Ps had announced the merger agreement last August. PDC and SRC shareholders both approved the merger at special meetings held Jan. 13.

In a statement on Jan. 14, Bart Brookman, president and CEO of PDC, said: “Today is a pivotal day for PDC as we have completed the merger of these two companies, both of which are grounded in strong core values and a shared commitment to responsible and safe operations.”

Upon closing, PDC now adds SRC’s core area of operations in the Greater Wattenberg Field of the Denver-Julesburg (D-J) Basin to its portfolio, which includes positions in the D-J Basin as well as in the Permian’s Delaware sub-basin. Combined, the company is set to become the second-largest oil and gas producer in the D-J Basin.

PDC, SRC Energy All-Stock Combination D-J Basin Asset Map (Source: PDC Energy Inc. August 26, 2019 Investor Presentation)

PDC, SRC Energy All-Stock Combination D-J Basin Asset Map (Source: PDC Energy Inc. August 26, 2019 Investor Presentation) 

Brookman added that the merger creates a combined company able to “delivering sustainable free cash flow” that would make significant shareholder returns possible—something that had been publicly campaigned for by Kimmeridge Energy Management Co., a private-equity firm which owns a stake in PDC.

In August, PDC said it expected the combination to generate about $800 million of free cash flow between the second half of 2019 and year-end 2021, half of which is planned to be returned to shareholders through an increased share repurchase program.

Under the merger agreement, SRC shareholders received a fixed exchange ratio of 0.158 PDC shares for each share of SRC common stock, representing an implied value of $3.99 per share based on the PDC closing price as of Aug. 23.

PDC also agreed to assume SRC’s net debt of about $685 million as of June 30.

J.P. Morgan was exclusive financial adviser to PDC for the transaction, and Wachtell, Lipton, Rosen & Katz served as its legal counsel. Citi and Goldman Sachs & Co. were financial advisers to SRC and Akin Gump Strauss Hauer & Feld LLP provided the company with legal counsel.