Published: March 9, 2022 |

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One of Denver’s largest oil producers is buying the largest privately-held oil and gas company in the Denver-Julesburg Basin, continuing the industry’s consolidation in a cash-and-stock deal valued at $1.3 billion.

PDC Energy struck a deal announced Monday morning to buy Denver-based Great Western Petroleum using 4 million shares of PDC Energy stock and $543 million in cash.

The transaction is expected to close before summer, the companies said.

PDC, already a major producer in the Denver-Julesburg Basin oilfields north of Denver, adds oil and gas acreage near its existing operations in Weld County plus potential drilling sites closer to the metro area in Adams County.

Acquiring Great Western is expected to boost PDC Energy’s output by about 55,000 barrels per day of oil and gas equivalent and add about 315 potential new drilling locations, 125 of which are either already drilled but not yet completed wells or are already permitted for drilling, PDC said.

“Coupled with our existing high-quality inventory, this core Wattenberg acquisition adds meaningful scale to PDC while also demonstrating our commitment to — and confidence in — the future of safe and responsible energy development in the state of Colorado,” said Bart Brookman, PDC president and CEO, in a deal announcement.

The deal adds to PDC Energy’s cash flow and brings good-quality inventory totaling about 1 billion barrels of oil and gas reserves while adding little to the company’s debt levels, he noted.

Great Western Petroleum is owned by affiliates of investment funds EIG and TPG Energy Solutions, and by The Broe Group, a Denver-based real estate and investment company that founded Great Western.

The company has been considered one of the most likely acquisition targets left to be bought in a string of deals combining Colorado-focused oil and gas companies over the past two years.

At least seven Denver-based oil and gas production companies have combined since the start of 2020, most of them in the formation of Civitas Resources Inc.

Just prior to that, PDC Energy was the major dealmaker, acquiring SRC Energy in 2019 in an all stock deal valued at $1.7 billion. 

That transaction for a time made PDC Energy the third-largest oil producer by volume in the state, and the biggest in-state producer headquartered from Denver.

PDC Energy also controls 36,000 acres in the oil-rich Permian Basin of Texas, where oil industry consolidation has also been the trend.

Some analysts had wondered whether PDC Energy could get involved in deal-making in Texas. Its acquisition in Colorado struck some who follow the company as a smarter deal.

“We believe [it] was a great alternative to what many believed would be an equity-funded, high-priced Permian deal. Excluding Colorado political risk, the acquisition checks a lot of the boxes required to get rewarded in today’s environment,” wrote analyst Neil Dingmann of Truist Securities in a note to clients.

The Great Western Petroleum deal value of $1.3 billion includes PDC Energy assuming about $500 million of Great Western debt.

PDC says it has the financial room for the transaction, noting it expects to have $1.3 billion in free-cash flow in 2022 if domestic crude oil prices average $75 per barrel. That’s after accounting for a stock buy-back program and the possibility of paying out a special dividend to PDC Energy shareholders.

Oil prices have surged above $100 per barrel this week amid the global supply uncertainty created by Russia’s invasion of Ukraine.

Source: Denver Business Journal

About PDC Energy
PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and Delaware Basin in west Texas. Its operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and our Delaware Basin operations are primarily focused in the horizontal Wolfcamp zones.

To stop by PDC Energy’s website, CLICK HERE

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