Blog Topics Current Article

PDC Energy Announces Strategic Combination with SRC Energy in All-Stock Transaction


Two major DJ Basin producers are merging this morning with the combination of PDC Energy and SRC Energy in an all-stock transaction valued at $1.7 billion including assumption of SRC’s net debt of $685 million. The deal creates the second largest producer in the DJ Basin (behind the pro-forma numbers of the Oxy/Anadarko combination created in 2019s mega-deal and ahead of Noble) and the company will hold a total of 182,000 net acres in the DJ (entirely in Weld County, Colorado) along with PDC’s 36,000 net acres position in the Delaware Basin.

“This deal looks to be right down the fairway for the consolidation needed among Small-to-Mid Cap E&Ps to help push towards strengthened financial metrics and restore investor confidence in a very challenging market,” said Enverus Senior M&A Analyst Andrew Dittmar.“ It is a low-to-no premium deal that is less about getting shareholders paid immediately via the transaction and more about building a larger, more efficient developer. The acreage positions fit like a glove in the DJ Basin, and pro-forma companies expect G&A synergies of $40 million in 2020.”

“While PDC does have a position in the Delaware Basin, it didn’t quite match up with the scale of its core Colorado holdings and this deal obviously further commits PDC to be a Colorado producer,” added Dittmar.

In addition to already having a larger position in the DJ, PDC may have been drawn to the valuation of its fellow Colorado producer. Companies like SRC along with fellow DJ E&Ps HighPoint Resources and Extraction Oil & Gas have seen their stock sold on Wall Street to the point that their enterprise value roughly equals the value of their existing production. That creates the opportunity to add accretive cash flow in a deal while securing future drilling inventory as a bonus.

PDC is likely also hoping that creating a larger company and more substantial production base helps lesson the activist pressure it has come under including a proxy challenge from Kimmeridge Energy Management.

On the headline this deal looks to check all the boxes Wall Street has asked for including consolidation of duplicate corporate structures, sticking to a basin the buyer knows well, and not overpaying on premium. Now the test will be how investors react with the deal in front of them. A positive reaction could help spur further deals of this type which is almost certainly healthy for the overall shale industry.



Energy’s most trusted SaaS platform — creating intelligent connections that uncover insights and opportunities to deliver extraordinary outcomes.

Subscribe to the Enverus Blog

A weekly update on the latest “no-fluff” insight and analysis of the energy industry.

Related Content

Energy Analytics Other
ByShane Reddell

In the current landscape of heightened environmental and social consciousness, upstream oil and gas companies face significant challenges in achieving favorable refinancing for their existing credit facilities. These challenges are compounded by the recent volatility in the debt markets and...

Energy Analytics Intelligence Publications
ByMaurice Smith

Wildfires that have already scorched more than double the average annual fire destruction across Alberta forced the shut-in of more than 300,000 boe/d while threatening future shuttering of output from the so-far largely unaffected oil sands region. Record temperatures saw...

Energy Analytics Energy Transition
ByHeather Leahey

CO2 containment risk has become one of the most popular topics among our clients evaluating CCUS projects. Operators need to understand and evaluate subsurface features that could trigger CO2 migration and containment losses as well as introduce additional safety, reputational...

Energy Analytics Energy Transition
ByRyan Luther

Anyone who thinks spending time at a public charging station is a blocker to buying an electric vehicle (EV) might want to consider the numbers behind EV and internal combustion engine (ICE) vehicle refueling times. The answer is that it...

Enverus Blog - 6 tax preparation tips for mineral and royalty managers
Energy Analytics
BySilas Martin

Recent years have been a roller coaster for mineral buyers, from record low commodity prices to highs for oil and natural gas in the last year. Going forward, challenges and opportunities will be plentiful. We expect oil prices between $80...

Power and Renewables
ByKenneth Curtis

It’s that time of year when generator and transmission outages are at their peak in PJM. The first half of April has not disappointed volatility-wise as the WHUB/NIHUB spread has set new 30-day highs largely driven by congestion. Figure 1:...

Enverus Blog - April's energy outlook: Analyst insights you can't miss
Analyst Takes Energy Analytics
ByChris Griggs

May marks a new month, and it’s essential to assess the energy landscape of April. Our Enverus Intelligence® | Research (EIR) team has scrutinized critical trends and advancements, delivering to you insightful analyst takes that can shape your business decisions....

Energy Analytics
ByCayley Krynowsky

Inventory is king in 2023. Operators and investors alike are more concerned than ever about remaining inventory – who has it, where is it, and will it be economic? To answer these questions, most turn to the tried-and-true, but also...

Enverus Blog - Securing domestic supply of lithium
Energy Analytics Energy Transition
ByGraham Bain

In last week’s issue of Energy Transition Today, we discussed the significant drop in solar capture prices in California over the past five years. This decline presents a valuable opportunity for solar projects to utilize co-located battery storage, charging them...

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Let’s get started!

We’ll follow up right away to show you a quick product tour.

Sign up for our Blog

Speak to an Expert

Book a Demo