PDC Energy, SRC Energy combine in $1.7 billion all-stock transaction

8/26/2019

DENVER - PDC Energy and SRC Energy announced a definitive merger agreement under which PDC will acquire SRC in an all-stock transaction valued at approximately $1.7 billion, including SRC’s net debt of approximately $685 million as of June 30, 2019.  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 August 23, 2019.  The transaction, which is expected to close in the fourth quarter of 2019, has been unanimously approved by each company’s board of directors.  

The transaciton increases PDC’s scale with a consolidated, contiguous Core Wattenberg leasehold position of approximately 182,000 net acres located entirely in Weld County and pro forma second quarter 2019 total production of nearly 200,000 boepd (166,000 boepd in the Wattenberg). On a pro forma basis, the combined company is the second largest producer in the DJ basin. Coupled with its approximate 36,000 net acre Delaware Basin position, the combined company will have core assets in two of the premier U.S. onshore basins.

The newly-combined company will be a low-cost mid-cap producer with anticipated G&A of approximately $2.00 per boe in 2020. PDC expects to realize approximately $40 million of G&A savings in 2020 with an incremental $10 million of G&A synergies in 2021, after the completion of its integration plan.

“SRC’s complementary, high-quality assets in the Core Wattenberg, coupled with our existing inventory and track record of operational excellence will create a best-in-class operator with the size, scale and financial positioning to thrive in today’s market,” said Bart Brookman, president and CEO of PDC. “We remain committed to our core Delaware Basin acreage position and are confident the combined company with its multi-basin focus will be well-positioned to deliver superior shareholder returns. With an even more competitive cost structure, including peer-leading G&A and LOE per boe, the combined company will have the financial flexibility and sustainable free cash flow to return significant capital to shareholders and capitalize on additional growth opportunities.”

Lynn A. Peterson, CEO and chariman of the board of SRC Energy commented, “I am proud of the SRC team and the high-quality acreage and low-cost operations we have built together. We believe that this transaction will establish the combined company as a leader in the Colorado energy industry. The transaction also provides SRC shareholders with the opportunity to participate in the significant upside potential created by a larger-scale DJ Basin producer with complementary assets in the prolific Delaware Basin. We look forward to working closely with PDC to ensure that the full potential of this combination is realized for the benefit of all of our stakeholders.

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