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)
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.
Recommended Reading
Diamondback Closes $1.55 Billion Lario Acquisition, Boosting Midland Basin Inventory
2023-02-01 - With the Lario Permian deal closed, Diamondback wraps up a pair of fourth-quarter 2022 deals in which it purchased private Midland Basin operators for a total of about $3.3 billion.
Marathon Closes $3B Eagle Ford Buy From Ensign
2022-12-30 - Marathon Oil’s transaction, along with other Eagle Ford deals — and Chesapeake Energy Corp.’s efforts to sell its South Texas position — have put the play back in the M&A spotlight.
John Hess: Bakken, US Shale to Plateau in Coming Years
2023-01-08 - Hess Corp. CEO John Hess expects his company’s shale production in the Bakken to plateau at 200,000 boe/d in 2024 and remain steady for eight to 10 years and overall U.S. shale production to flatten in 2025 or 2026.
US Drillers Add Oil, Gas Rigs for Third Consecutive Week: Baker Hughes
2022-11-18 - Even though the U.S. rig count increased during most months over the past two years, weekly increases have averaged zero since the start of the pandemic in March 2020, helping keep oil production below record levels seen before the pandemic.
US Drillers Add Oil, Gas Rigs for Second Consecutive Month: Baker Hughes
2022-11-27 - U.S. oil rigs rose four to 627 this week, their highest since March 2020, while gas rigs fell two to 155, according to the weekly Baker Hughes rig count report.