PDC Energy will spend $1.3 billion to acquire the assets of privately held Great Western Petroleum. Great Western is a Denver-based DJ Basin operator owned by affiliates of EIG, TPG Energy Solutions LP, and The Broe Group with core operations in the western flank of the Wattenberg field in Weld and Adams counties in Colorado. Under the terms of the agreement, the acquisition will be financed through the issuance of 4 million shares of common stock to existing Great Western shareholders and $543 million of cash.
The transaction is expected to close in the second quarter of 2022 and is expected to be financed with cash on hand and borrowings under PDC’s credit facility. The deal also includes net debt of around $500 million.
PDC’s production profile will grow by around 55,000 BOE/D comprising approximately 42% crude oil and 67% liquids and year-end 2021 proved reserves of 185 million BOE as a result of the deal. PDC estimates its pro forma year-end 2021 proved reserves were about 1 billion BOE.
The deal not only adds select acreage in PDC’s core Weld County holdings, but also expands its footprint into northern Adams County, Colorado. Dubbed the Range area, it includes 213 of the total 315 identified drilling locations included in the purchase— approximately 117 of which are either drilled but uncompleted wells (DUCs) or approved permits. The company’s pro forma combined DUC and approved permit count was approximately 500 locations at year-end 2021.
“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, president and chief executive of PDC Energy. “This opportunity meets all the company’s acquisition-related criteria we’ve previously communicated by strengthening our free cash flow, increasing our shareholder returns, honoring the balance sheet and adding competitive, high-quality inventory.”
The deal is expected to drive a 25% increase in total production and a 35% increase in oil production for PDC. PDC expects some synergies to emerge from the deal including a 15% improvement in general and administrative costs per BOE.
