Chevron Corp. has completed its purchase of Denver-based PDC Energy, making the multinational company Colorado’s largest oil and gas producer.
Chevron said Monday that the purchase was a done deal after PDC shareholders approved the acquisition. The all-stock transaction was valued at $7.6 billion, including debt.
Under the deal, Chevron acquired 275,000 net acres, much of it next to its existing operations in northeast Colorado’s Denver-Julesburg Basin, and more than 1 billion barrels of oil equivalent in proven reserves. The company also added 25,000 acres to its operations in the Permian Basin of West Texas and southeastern New Mexico.
Altogether, Chevron’s daily production in the Denver-Julesburg Basin will be roughly 400,000 barrels of oil equivalent and its total acreage is a little more than 600,000 acres, said Kim McHugh, vice president of the company’s Rockies business unit.
“Once we combine these, we are about the fourth-largest business unit inside Chevron globally for production,” McHugh said. “We’re a measurable producer for the company and we add to the free cash flow and the barrels. It’s an exciting time.”
Bruce Niemeyer, Chevron’s president for Americas Exploration and Production, said the two companies have similar cultures, focusing on safe and reliable operations.
“PDC’s high-quality assets open up even greater opportunities in important U.S. basins where Chevron already has a strong presence,” Niemeyer said in a statement.
Chevron’s acquisition is among several moves that have consolidated Colorado’s oil and gas production. Chevron, based in California, bought Houston-based Noble Energy for $5 billion in 2020. At the time, Noble was the second-largest producer in the D-J Basin.
In 2021, Denver-based Bonanza Creek Energy and Extraction Oil and Gas Inc. merged to create Civitas Resources. Civitas bought Denver’s Crestone Peak Resources later that year in a transaction worth about $4.5 billion.
In June, Civitas Resources announced deals totaling nearly $5 billion and moved into the Permian Basin to buy affiliates of Hibernia Energy and Tap Rock Resources, which were managed by the private equity firm NGP Energy Capital Management.
“The D-J (Basin) has gotten to be the most consolidated shale oil play,” said Andrew Dittmar, director at Enverus Intelligence Research. “There are a few smaller remaining private companies out there, but not much at scale that you could acquire in the D-J.”
Dittmar believes that helps explain the recent moves by PDC Energy and Civitas Resources.
“PDC chose one route, to go ahead and exit and take some equity in a major. Civitas took the opposite route, looking beyond the D-J to other acquisition opportunities, with the Permian being the default because there’s still so much remaining there,” Dittmar said.
He believes Chevron bought PDC Energy because of its assets in the D-J Basin. “I think that’s a stamp of approval on the D-J that a major (corporation) like Chevron wants to make it a more core part of its portfolio going forward.”
Colorado was the fifth-largest crude oil-producing state in 2022, with 82% of the production coming from Weld County, according to the U.S. Energy Information Administration. The state was the eighth-largest natural gas producer.
PDC Energy and Chevron each have 500 employees in Colorado. McHugh said Chevron is holding town halls and to talk to workers about plans for blending the companies and what kinds of changes will be made.
“We’re trying to figure that out and to be as transparent and as respectful to the PDC employees as we can and meet a timeline so we don’t have it dragging out,” McHugh said.
Chevron and PDC each have an office in Denver. Chevron has a field office in Greeley and PDC Energy has one in Evans.
While the D-J Basin has experienced more consolidation than other oil and gas fields, Dittmar with Enverus said it is a trend across the industry. Production has been relatively flat as companies and investors have continued to prioritize freeing up cash and paying down debt.
“The economics in the D-J are really strong for the most part,” Dittmar said.
There was the “political overhang,” Dittmar said, of the 2019 state law that mandated a broad overhaul of oil and gas regulations, including how far wells must be drilled from homes and other buildings and rules intended to protect public health and safety and the environment.
“That was maybe more of a concern a couple of years ago,” he said. “Companies have been able to manage it fairly well.”
McHugh said both Chevron and PDC respect the higher expectations Colorado and its residents have for oil and gas operators. She said the companies are taking steps to meet those expectations, including consolidating equipment on well sites to lower emissions and reduce the use of the land surface.
“We want to respect the environment and the wildlife and do the right things and I believe we do,” McHugh said.
Get more business news by signing up for our Economy Now newsletter.
