[Editor's note: This article was updated at 9:20 a.m. on Aug. 24 to include additional information.]
PDC Energy Inc. (NASDAQ: PDCE) said Aug. 23 it's entering the Delaware Basin in one of the largest transactions so far this year in the Permian, which has been a hub for A&D activity.
The Denver-based company said it entered definitive agreements to acquire two privately held companies, Arris Petroleum Corp. and 299 Resources LLC, managed by Kimmeridge Energy Management Co. for about $1.5 billion in cash and stock, subject to due diligence and certain customary closing conditions.
The deal, which adds a second core operating area to PDC's portfolio, consists of about 57,000 net acres in Reeves and Culberson counties in West Texas and about 7,000 barrels of oil equivalent per day of current net production.
PDC currently operates a large position in the core Wattenberg Field in the Denver-Julesburg Basin in Colorado. The company's portfolio also includes assets in the Utica Shale in Ohio.
Despite the low-oil-price environment, the Permian has already seen billions of dollars in new deals in 2016.
On Aug. 15, Concho Resources Inc. (NYSE: CXO) said it will buy 40,000 net acres in the Midland Basin from Reliance Energy. The deal, valued at $1.625 billion, appears to be the basin's largest deal of the year.
Also in August, SM Energy Co. (NYSE: SM) entered an agreement to acquire a largely contiguous acreage position in the Permian from Rock Oil Holdings LLC for $980 million in cash. The acquisition doubled the company's footprint in the Midland Basin to about 46,750 net acres from roughly 20,000 net acres.
Consideration for PDC’s Permian acquisition includes about $915 million of cash and about 9.4 million shares of its common stock valued at about $590 million, according to the company.
The company plans to finance the transaction through potential equity and debt offerings and a committed financing from J.P. Morgan. PDC's current liquidity is about $1.4 billion, the company said.
The deal includes 21 horizontal wells with 93% average working interest. PDC is also acquiring owned and operated midstream infrastructure as part of the transaction.
PDC expects to spend about $55 million to $65 million in the Delaware Basin for the remainder of 2016. The company's plans this year include spudding about nine horizontal wells and expansion of certain midstream infrastructure.
The transaction is expected to close in fourth-quarter 2016.
J.P. Morgan was PDC's exclusive financial adviser on the acquisition and sole provider of committed financing. Davis Graham & Stubbs LLP was legal counsel to PDC. Evercore was financial adviser and Sidley Austin LLP was legal counsel to each of the sellers.
Emily Moser can be reached at email@example.com.
John H. Pinkerton co-founded Encino Acquisition Partners in 2017 following a 22-year career as president and CEO of Range Resources Corp.
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