Colorado’s PDC Energy said to be in merger talks with rival SRC Energy

NEW York (Bloomberg) - PDC Energy is in talks to combine with rival explorer SRC Energy, in a potential deal that would create a larger oil and gas player in Colorado, according to people familiar with the matter.

The companies, which are both active drillers in Colorado’s Denver-Julesburg Basin, are in discussions, but there is no guarantee the talks will lead to a deal, the people said, asking not to be identified because the matter isn’t public.

PDC Energy rose less than 1% to close at $26.16 on Tuesday, giving the company a market value of about $1.7 billion. SRC Energy fell 1.7% to $3.97, giving it a market value of about $977 million.

Representatives for PDC Energy and SRC Energy didn’t immediately respond to requests for comment.

The discussions come as small and mid-size oil and gas explorers increasingly team up to cut costs and better cope with volatile commodity prices, among other pressures. Callon Petroleum Co. agreed to buy Carrizo Oil & Gas Inc. for $1.2 billion in July, while Comstock Resources Inc. agreed to acquire Covey Park Energy LLC for $1.1 billion in June.

PDC Energy primarily drills for oil and gas in two areas. It has 96,000 net acres in the Wattenberg Field north of Denver, where it is based, according to its website. It also has 42,000 net acres in the Delaware Basin, which is part of the booming Permian Basin of West Texas and New Mexico.

In May, private equity firm Kimmeridge Energy Management fell short in an effort to revamp PDC Energy’s board. It has pushed the company for months to cut costs, return cash to shareholders and pursue acquisitions. Kimmeridge owns about 5% of PDC’s shares, according to data compiled by Bloomberg.

SRC Energy does all of its drilling in Weld County, Colorado, according to an investor presentation in July.