Chevron Corp announced on Monday that it will purchase PDC Energy Inc. for $7.6 billion, including debt, in an all-stock deal, expanding its U.S. drilling inventory.
Wall Street has been on the company to demonstrate that it can continue growing production after 2027 as its primary shale properties in the Permian Basin of West Texas and New Mexico approach their peak output.
The PDC Energy acquisition, which boosts Chevron’s shale operations in Colorado and Wyoming, is the second in the last three years. After purchasing Noble Energy for $13 billion in 2020, Chevron is already one of the major producers in the Denver-Julesburg Basin.
Chevron said in a statement that by purchasing PDC, it will increase its proven reserves by 10% at an estimated cost of less than $7 per barrel.
The oil firm had $15.7 billion in cash on hand at the end of the first quarter, roughly quadruple the amount required for operating activity thanks to last year’s sky-high crude prices.
The business had stated in April that it anticipated reducing some of its cash.
Chevron’s annual free cash flow is predicted to increase by $1 billion as a result of the PDC deal. The agreement values PDC’s equity at $6.3 billion, or $72 per share, which is a premium of 10.56% over Friday’s close.
The transaction, which is anticipated to finalize by the end of the year, was unanimously authorized by the boards of both businesses, according to Chevron.
