PDC Energy, with holdings in Colorado’s Wattenberg Field and the Delaware Basin of West Texas, said Monday it is acquiring Denver-based SRC Energy in an all-stock deal valued at about $1.7 billion.
As part of the merger, expected to close in the fourth quarter of 2019, PDC will also take on SRC’s net debt of about $685 million as of June 30. PDC said in a statement that it will increase its position in the Wattenberg to 182,000 acres, all in Weld County, and produce nearly 200,000 barrels of oil equivalent daily this year.
The transaction will result in the second largest oil and gas producer in the Denver-Julesburg Basin, behind the combined Occidental Petroleum and Anadarko Petroleum, according to Enverus, which provides data analytics for the energy industry.
“The consolidated footprint will enable an efficient, clearly communicated long-term development plan,” said a statement by PDC and SRC.
The shared statement said the combined operation will place a continued emphasis on eliminating trucking, with over 95% of oil production to be transported through a pipeline.
Under the terms of the agreement, SRC shareholders will receive 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, according to the statement.
The merger will produce an estimated $800 million in cash flow through 2021, PDC said. PDC’s shares rose as much as 23 percent Monday and SRC shares gained 18 percent, Bloomberg reported.
The deal appears to be “right down the fairway” for the consolidation needed for small to mid-capitalized exploration and production companies “to help push towards strengthened financial metrics and restore investor confidence in a very challenging market,” senior Enverus analyst Andrew Dittmar said in a statement.
