Chevron announced Monday it is officially purchasing PDC Energy in a $6.3 billion deal, bolstering its U.S. oil and gas operations. CVX edged up.
The California-based energy giant reported Monday morning that PDC Energy shareholders had approved the purchase. The deal was completed two months after Chevron's initial announcement in late May it had agreed to buy PDC Energy.
With deal complete, Chevron now has a stronger foothold in the resource-rich Denver-Julesberg Basin, bolstering its U.S. onshore holdings. The deal weighs in with a total enterprise value of $7.6 billion, including PDC's $1.3 billion in debt.
"PDC's high-quality assets open up even greater opportunities in important U.S. basins where Chevron already has a strong presence," Chevron's President for Americas Exploration & Production Bruce Niemeyer said in a statement Monday.
CVX edged up 0.4% to 159.90 Monday during market trade. On Friday, Chevron stock closed at 159.31. The Dow Jones component is down around 8% in 2023.
Chevron Stock: The Deal
Chevron previously said it expects the deal to add to "all key financial measures" within the first year after closing. Earlier, CVX said it expected the deal to add about $1 billion per year in free cash flow with Brent crude at $70 a barrel and Henry Hub natural gas at $3.50 per thousand cubic feet.
Oil prices are sitting on a six-week advance, with West Texas Intermediate futures settling back to just above $82 per barrel, after touching a 10-month high early Monday. Brent crude futures traded around $85 per barrel on Monday, also the highest level since November. Meanwhile, U.S. natural gas prices advanced around 4%.
Chevron also said it planned to increase capital spending by $1 billion and boosted its spending guidance to $14 billion-$16 billion annually through 2027. The previous forecast was $13 billion-$15 billion.
In late July Chevron along with fellow energy giant ExxonMobil reported second-quarter sales falling around 30% with profits halved compared to a year ago on lower oil and natural gas prices in 2023.
Chevron's net oil equivalent production so far in 2023 is running flat vs. 2022, totaling 2.9 million barrels of oil equivalent per day.
Meanwhile, Chevron returned $7.2 billion to shareholders in Q2, with $2.8 billion in dividends and $4.4 billion in stock purchases.
Oil patch mergers and acquisitions ebbed in the first quarter to their lowest levels since Q1 2016, according to KPMG. At the end of Q1, KPMG reported oil and gas deals dropped 35% sequentially to 74 in the quarter.
However, the Chevron deal, and ExxonMobil's recent announcement to purchase Denbury for nearly $5 billion, could signal a change in the back half of 2023.
"Deal making will most likely grow — but only at a modest rate," KPMG analysts wrote. "Companies may want to add to their head counts through M&A due to the tight labor market."
Please follow Kit Norton on Twitter @KitNorton for more coverage.
YOU MAY ALSO LIKE:
Get An Edge In The Stock Market With IBD Digital
Labor Unions Keep The Heat On Starbucks And Amazon
