The deal, valued at $1.625 billion, appears to be the basin’s largest deal of the year.
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J.P. Morgan served as the financial adviser to PDC, while Davis Graham & Stubbs LLP served as legal counsel to PDC. Evercore was financial adviser and Sidley Austin LLP was legal counsel to each of the sellers.
The transaction is slated for completion in the fourth quarter of this year.
“Adding this DE position to our Core Wattenberg acreage gives us more than one billion net Boe of liquid-rich reserve potential in two of the top-tier U.S. onshore basins”.
The privately negotiated transaction includes roughly 57,000 acres in Reeves and Culberson counties in Texas, which now produce approximately 7,000 barrels of oil-equivalent per day (BOE/d). PDC is also acquiring owned and operated midstream infrastructure as part of the transaction. The locations are expected to hold “significant upside potential”, with preliminary estimated net reserve potential of around 530 million boe. Until now, PDC has concentrated on wells in Colorado and OH, according to its statement.
In other PDC Energy news, Director David C. Parke sold 500 shares of the company’s stock in a transaction on Monday, August 15th. The energy company plans to finance the cash portion of the deal through debt financing and equity issuance. The research firm believes the agreement could be “transformative” for the oil and gas company. Royal Bank Of Canada raised their price target on shares of PDC Energy from $67.00 to $70.00 and gave the company an “outperform” rating in a research note on Wednesday, August 10th. The market was concerned about the company’s limited exposure to the core Wattenberg assets.
“PDC will continue to emphasize the importance of a strong balance sheet while we pursue additional value creation through operational enhancements and inventory expansion”.
Lance Lauck, executive V.P., Corporate Development and Strategy, said, “Adding this DE position to our Core Wattenberg acreage gives us more than one billion net boe of liquid-rich reserve potential in two of the top-tier USA onshore basins”. The most optimistic analyst sees the stock reaching $96.00 while the most conventional predicts the target price at $58.00. The author does not have any position in the stock mentioned and in no way is recommending to Buy or Sell. The company’s market cap is $3.12 billion. (NASDAQ:PDCE), 10 rate it a “Strong Buy”, 2 rate it a “Buy”, 7 are advising to Hold the shares and 0 are saying “Sell”. The 12-month target price is $74.13, with upside potential of 43.2%.
PDC Energy plans to strengthen its foothold in the DE basin in the second half of 2016 (2HFY16).
It is also close to completing operations on two horizontal wells and plans to operate two drilling rigs by the end of the year.
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Analysts at Canaccord believe the Delaware Basin has now become the focus of future merger and acquisition (M&A) activities in the sector. The acquisition doubled the company’s footprint in the Midland Basin to about 46,750 net acres from roughly 20,000 net acres.
