PDC to Buy SRC in $1.7B Deal

PDC to Buy SRC in $1.7B Deal
PDC Energy will acquire SRC in an all stock transaction valued at approximately $1.7 billion.

PDC Energy, Inc. has entered into a definitive merger agreement with SRC Energy, Inc., under which PDC will acquire SRC in an all stock transaction valued at approximately $1.7 billion.

The deal creates a “premier” mid-cap operator with a “peer-leading” cost structure and free cash flow profile, according to PDC, which highlighted that on a pro-forma basis, the combined company is the second largest producer in the Denver-Julesburg (DJ) basin.

Including both the DJ and Delaware basin, the pro-forma company has year-end 2018 SEC proved reserves of approximately 850 million barrels of oil equivalent and expects to exit 2019 producing approximately 200,000 barrels of oil equivalent per day, PDC noted.

PDC expects the combination to generate “significant corporate synergies” including annual general and administrative savings of approximately $50 million. 

The transaction, which is expected to close in the fourth quarter, is subject to customary closing conditions and the satisfaction of certain regulatory approvals, including the approval of PDC and SRC shareholders. The deal has been unanimously approved by each company’s board of directors. 

Upon closing, PDCs’ board of directors will be expanded to nine directors, expected to include two members from the SRC board of directors. The combined company will be led by PDC’s executive management team and will remain headquartered in Denver, Colorado.

“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,” Bart Brookman, president and chief executive officer of PDC, said in a company statement.

“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,” he added.

Lynn A. Peterson, chief executive officer and chairman of the board of SRC Energy, said, “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,” he added.  

Founded in 1969, PDC describes itself as an independent exploration and production company focused on the responsible development of natural resources in some of the most prolific oil and gas regions in the United States. SRC describes itself as an independent DJ basin operator. The company was founded in 2008 as Synergy Resources Corporation.

Earlier this month, Bloomberg reported that PDC was in talks to combine with rival explorer SRC Energy.

Back in July, U.S. independent Callon Petroleum Company announced that it will acquire Houston-based Carrizo Oil & Gas, Inc. in an all-stock transaction valued at $3.2 billion. In June, Comstock Resources, Inc. announced that it was acquiring Covey Park Energy LLC in a cash and stock deal valued at $2.2 billion.

To contact the author, email andreas.exarheas@rigzone.com


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