- Complementary to Chevron’s operations in important U.S.
production basins
- Adds 10% to oil equivalent proved reserves for under $7 per
barrel
- Accretive to earnings per share and return on capital
employed (ROCE)
- Expected to add $1 billion to annual free cash flow
Chevron Corporation (NYSE: CVX) announced today that it has
entered into a definitive agreement with PDC Energy, Inc. (NASDAQ:
PDCE) to acquire all of the outstanding shares of PDC in an
all-stock transaction valued at $6.3 billion, or $72 per share.
Based on Chevron’s closing price on May 19, 2023 and under the
terms of the agreement, PDC shareholders will receive 0.4638 shares
of Chevron for each PDC share. The total enterprise value,
including debt, of the transaction is $7.6 billion.
The acquisition of PDC provides Chevron with high-quality assets
expected to deliver higher returns in lower carbon intensity basins
in the United States. PDC brings strong free cash flow, low
breakeven production and development opportunities adjacent to
Chevron’s position in the Denver-Julesburg (DJ) Basin, as well as
additional acreage to Chevron’s leading position in the Permian
Basin.
“PDC’s attractive and complementary assets strengthen Chevron’s
position in key U.S. production basins,” said Chevron Chairman and
CEO Mike Wirth. “This transaction is accretive to all important
financial measures and enhances Chevron’s objective to safely
deliver higher returns and lower carbon. We look forward to
welcoming PDC’s team and shareholders to Chevron and continuing
both companies’ focus on safe and reliable operations.”
“The combination with Chevron is a great opportunity for PDC to
maximize value for our shareholders. It provides a global portfolio
of best-in-class assets,” said Bart Brookman, PDC President and
CEO. “I look forward to blending our highly complementary
organizations, and I’m excited that PDC’s assets will help propel
Chevron toward our shared goal for a lower carbon energy
future.”
Transaction Benefits
- Accretive to earnings per share, free cash flow and
ROCE: Chevron anticipates the transaction to be accretive to
all key financial measures within the first year after closing and
to add about $1 billion in annual free cash flow at $70 per barrel
Brent and $3.50 per Mcf Henry Hub (approximate 2024 futures prices
as of May 2023).
- Strong strategic fit: Increases Chevron’s proved
reserves by 10% at an acquisition cost under $7 per barrel of oil
equivalent (BOE).
- DJ Basin – 275,000 net acres adjacent to Chevron’s existing
operations that add over 1 billion BOE of proved reserves in highly
economic locations and enable capital and operational
synergies.
- Permian Basin – 25,000 net acres that are held by production
and will be integrated into Chevron’s existing capital efficient
development operations.
- Capital and cost efficient:
- Capital expenditures – Chevron expects to increase capex by ~$1
billion per year, raising its guidance range to $14 to $16 billion
through 2027, after realizing about $400 million in capex
efficiencies post-closing.
- Operational expenditures – the transaction is expected to
achieve run-rate cost synergies of around $100 million before tax
within a year of closing.
Transaction Details
The acquisition consideration is structured with 100 percent
stock utilizing Chevron’s equity. In aggregate, upon closing of the
transaction, Chevron will issue approximately 41 million shares of
common stock. Total enterprise value of $7.6 billion includes net
debt.
The transaction has been unanimously approved by the Boards of
Directors of both companies and is expected to close by year-end
2023. The acquisition is subject to PDC shareholder approval. It is
also subject to regulatory approvals and other customary closing
conditions.
The transaction price represents a premium of 14% on a 10-day
average based on closing stock prices on May 19, 2023.
Advisors
Morgan Stanley & Co. LLC is acting as lead financial advisor
to Chevron. Evercore also advised Chevron. Paul, Weiss, Rifkind,
Wharton & Garrison LLP is acting as legal advisor to Chevron.
J.P. Morgan Securities LLC is acting as lead financial advisor to
PDC Energy and provided a fairness opinion to the Board of
Directors. Wachtell, Lipton, Rosen & Katz and Davis Graham
& Stubbs are jointly serving as the Company’s legal counsel.
PJT Partners also advised PDC Energy.
Conference Call
Chevron will discuss its proposed acquisition of PDC with
security analysts in a call today, Monday, May 22, 2023, at 8:00
a.m. PT. A webcast of the discussion will be available in a
listen-only mode to individual investors, media, and other
interested parties on Chevron’s website at www.chevron.com under
the “Investors” section, or by calling 800-378-6902 and providing
the conference ID 5318663. Prepared remarks and presentation
materials for today’s call will be available prior to the call at
approximately 5:30 a.m. PT and located under “Events and
Presentations” in the “Investors” section on the Chevron
website.
About Chevron
Chevron is one of the world’s leading integrated energy
companies. We believe affordable, reliable and ever-cleaner energy
is essential to enabling human progress. Chevron produces crude oil
and natural gas; manufactures transportation fuels, lubricants,
petrochemicals and additives; and develops technologies that
enhance our business and the industry. We aim to grow our
traditional oil and gas business, lower the carbon intensity of our
operations and grow new lower carbon businesses in renewable fuels,
hydrogen, carbon capture, offsets and other emerging technologies.
More information about Chevron is available at www.Chevron.com.
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.
NOTICE
As used in this news release, the term “Chevron” and such terms
as “the company,” “the corporation,” “our,” “we,” “us” and “its”
may refer to Chevron Corporation, one or more of its consolidated
subsidiaries, or to all of them taken as a whole. All of these
terms are used for convenience only and are not intended as a
precise description of any of the separate companies, each of which
manages its own affairs.
Please visit Chevron’s website and Investor Relations page at
www.Chevron.com and www.Chevron.com/investors, LinkedIn:
www.linkedin.com/company/Chevron, Twitter: @Chevron, Facebook:
www.facebook.com/Chevron, and Instagram: www.instagram.com/Chevron,
where Chevron often discloses important information about the
company, its business, and its results of operations.
Non-GAAP Financial Measures - This news release includes
free cash flow. Free cash flow is defined as net cash provided by
operating activities less capital expenditures and generally
represents the cash available to creditors and investors after
investing in the business. The company believes this measure useful
to monitor the financial health of the company and its performance
over time.
CAUTIONARY STATEMENTS RELEVANT TO
FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR”
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
This communication contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements generally include statements
regarding the potential transaction between Chevron Corporation
(“Chevron”) and PDC Energy, Inc. (“PDC”), including any statements
regarding the expected timetable for completing the potential
transaction, the ability to complete the potential transaction, the
expected benefits of the potential transaction (including
anticipated accretion to return on capital employed, free cash
flow, and earnings per share, as well as the expected delivery of
higher returns and lower upstream carbon intensity) and projected
operational and capital synergies, projected financial information,
future opportunities, and any other statements regarding Chevron’s
and PDC’s future expectations, beliefs, plans, objectives, results
of operations, financial condition and cash flows, or future events
or performance. Words or phrases such as “anticipates,” “expects,”
“intends,” “plans,” “targets,” “advances,” “commits,” “drives,”
“aims,” “forecasts,” “projects,” “believes,” “approaches,” “seeks,”
“schedules,” “estimates,” “positions,” “pursues,” “progress,”
“may,” “can,” “could,” “should,” “will,” “budgets,” “outlook,”
“trends,” “guidance,” “focus,” “on track,” “goals,” “objectives,”
“strategies,” “opportunities,” “poised,” “potential,” “ambitions,”
“aspires” and similar expressions are intended to identify such
forward-looking statements. All such forward-looking statements are
based on current expectations of Chevron’s and PDC’s management and
therefore involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual
results to differ materially from the results expressed in the
statements. Key factors that could cause actual results to differ
materially from those projected in the forward-looking statements
include the ability to obtain the requisite PDC stockholder
approval; uncertainties as to the timing to consummate the
potential transaction; the risk that a condition to closing the
potential transaction may not be satisfied; the risk that
regulatory approvals are not obtained or are obtained subject to
conditions that are not anticipated by the parties; the effects of
disruption to Chevron’s or PDC’s respective businesses; transaction
costs; Chevron’s ability to achieve the benefits and projected
operational and capital synergies from the proposed transaction;
Chevron’s ability to promptly, efficiently and effectively
integrate acquired operations into its own operations; unknown
liabilities; the diversion of management time on
transaction-related issues; and the effects of industry, market,
economic, political or regulatory conditions outside of Chevron’s
or PDC’s control. Additional risks that may affect Chevron’s
results of operations and financial position appear in Part I, Item
1A “Risk Factors” of Chevron’s Annual Report on Form 10-K for the
year ended December 31, 2022, and in subsequent filings with the
U.S. Securities and Exchange Commission (“SEC”). Additional risks
that may affect PDC’s results of operations and financial position
appear in Part I, Item 1A “Risk Factors” of PDC’s Annual Report on
Form 10-K for the year ended December 31, 2022, and in subsequent
filings with the SEC. Other unpredictable or factors not discussed
in this news release could also have material adverse effects on
forward-looking statements. Neither Chevron nor PDC assumes any
obligation to update any forward-looking statements, except as
required by law. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
hereof.
IMPORTANT INFORMATION FOR INVESTORS AND
STOCKHOLDERS
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended. In connection with the potential transaction, Chevron
expects to file a registration statement on Form S-4 with the SEC
containing a preliminary prospectus of Chevron that also
constitutes a preliminary proxy statement of PDC. After the
registration statement is declared effective, PDC will mail a
definitive proxy statement/prospectus to stockholders of PDC. This
communication is not a substitute for the proxy
statement/prospectus or registration statement or for any other
document that Chevron or PDC may file with the SEC and send to
PDC’s stockholders in connection with the potential transaction.
INVESTORS AND SECURITY HOLDERS OF CHEVRON AND PDC ARE URGED TO READ
THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS FILED WITH THE
SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and
security holders will be able to obtain free copies of the proxy
statement/prospectus (when available) and other documents filed
with the SEC by Chevron or PDC through the website maintained by
the SEC at http://www.sec.gov. Copies of the documents filed with
the SEC by Chevron will be available free of charge on Chevron’s
website at http://www.chevron.com/investors. Copies of the
documents filed with the SEC by PDC will be available free of
charge on PDC’s website at
http://www.pdce.com/investors-overview.
Chevron and PDC and certain of their respective directors,
certain of their respective executive officers and other members of
management and employees may be considered participants in the
solicitation of proxies with respect to the potential transaction
under the rules of the SEC. Information about the directors and
executive officers of Chevron is set forth in its Annual Report on
Form 10-K for the year ended December 31, 2022, which was filed
with the SEC on February 23, 2023, and its proxy statement for its
2023 annual meeting of stockholders, which was filed with the SEC
on April 12, 2023. Information about the directors and executive
officers of PDC is set forth in its Annual Report on Form 10-K for
the year ended December 31, 2022, which was filed with the SEC on
February 22, 2023, and its proxy statement for its 2023 annual
meeting of stockholders, which was filed with the SEC on April 12,
2023. These documents can be obtained free of charge from the
sources indicated above. Additional information regarding the
interests of such participants in the solicitation of proxies in
respect of the potential transaction will be included in the
registration statement and proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230522005303/en/
Investor Contacts: Jake Spiering Chevron
invest@chevron.com
Aaron Vandeford PDC Energy aaron.vandeford@pdce.com
Media Contacts: Braden Reddall Chevron
breddall@chevron.com (925) 842 - 2209
Andrew Siegel / Mahmoud Siddig Joele Frank, Wilkinson Brimmer
Katcher (212) 355 - 4449
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