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All Eyes Are on the Rocky Mountains State, as PDC Acquires Great Western for $1.3B

Great Western Petroleum's assets will be acquired by PDC Energy for $1.3 billion.

A Denver-based producer, Great Western has core operations in Weld and Adams counties in Colorado with 54,000 net acres and about 55,000 boe/d (42% oil / 67% liquids) of PDP. In total, Great Western has 315 operating locations, of which about 125 are DUCs/approved permits. It is owned by affiliates of EIG, TPG Energy Solutions, and The Broe Group.

As part of the agreement, the acquisition will be financed by issuing 4 million shares of common stock to existing Great Western shareholders and by providing $543 million in cash to the company.

According to PDC’s president and CEO Bart Brookman, besides adding meaningful scale to the company itself, this acquisition simultaneously signals to the market PDC's commitment to ensuring that reliable and sustainable energy production will continue in Colorado for years to come.

Via this deal, PDC Energy’s position in the D-J basin increases roughly to 230,000 net acres, additionally, shareholder returns will be boosted thanks to the M&A overhang that will be removed. Besides these assets, the company also holds some 25,000 net acres in the Delaware Basin in the Permian.

If undeveloped acreage is not included, the analysts estimated that the purchase price would be about $24,000 per boe/d of flowing gas.

It is expected that the transaction will result in industry-leading shareholder returns, according to CFO Scott Meyers. The company plans to finance the transaction with cash on hand and borrowings under its credit facility. The Pro forma leverage ratio for PDC is not expected to exceed 1.0x at closing.

In addition to honoring and growing the base dividend, PDC intends to aggressively buy back nearly 60% of its shares while they are trading at an unwarranted discount to intrinsic value. It is planned that PDC will retire more shares by the end of the third quarter than it will issue in connection with the Great Western merger.

As of 2022, PDC Energy expects to run three rigs and 1.5 crews on the combined D-J asset, which is estimated to cost between $900 million and $1 billion in Pro-forma CAPEX. On a Pro-forma basis, pre-tax production will be between 250,000 and 260,000 boe/d, and oil will be between 82,000 and 87,000 barrels/day.

All in all, PDC expects to increase its total production by 25% and its oil production by 35% as a result of the deal. The deal should also result in some synergies including a 15% reduction in overall cost per BOE.

Davis, Graham, and Stubbs LLP provides PDC with legal counsel, and PJT Partners is the exclusive financial adviser. The financial adviser to Great Western is Citi, while the legal counsel is Latham & Watkins LLP.

And if you wish to learn more about various lucrative oil & gas assets, contact our Houston sales office or SCHEDULE A DEMO to learn how Rextag can help you leverage energy data for your business.

Tel. +1 713-203-3128

Email: treitmeier@hartenergy.com

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Winds of Change: Admiral Sold Its Assets in Delaware Basin

And Petro-Hunt E&P is the new sheriff in town with 21,430 net acres of leasehold in the Basin, production of which surpasses 7,000 bbl/d and 100 MMcf/d respectively. To take advantage of it, Petro-Hunt plans to begin an active development drilling program on these assets in the coming months heavily upgrading the numbers of its 775 operating oil wells and contributing to over 8,100 non-operated wells. Time will tell, however, whether or not this move will be able to deliver such results.

In light of the conflict in Ukraine, buyout firms are currently scurrying to make cash from the U.S. crudeprices reaching their highest level since 2008. And one of the largest privately-owned US-based oilproducers may be up for sale. EnCap Investments looks to sell its portfolio company Ameredev II for over $4 billion including debt. It’s important to note, however, that both EnCap and Ameredev II alike are staying tight-lipped on the matter.

Oil output in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. Additionally, gas productivity in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Given that this growth has been expected, recent global market changes make forecasting the output even more challenging. Learning how production will change is easier with early activity tracking, a new service recently launched by Rextag – Pad Activity Monitor. With the help of PAM, you are able to monitor well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days. Additionally, it cuts down activity reporting lag times by at least 98%, from 120-180 days down to just 5-8 days. In order to access reports, charts, tables, and mapping visualizations via Rextag’s Energy DataLink use a web-based application allowing users to filter, download and identify activity on a map or data table. Moreover, customers will be able to set up daily, weekly, and monthly email report notifications.

The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.

No sooner had the crude prices soared above $100/bbl than the industry professionals believed in an incredible growth of drilling activity in North America’s largest shale patch. Analysts speculate that additional output of 500,000 barrels of oil daily would become a significant part (4%) of overall U.S. daily production. That is going to flatter oil and gasoline prices. Drilling permits in the Permian Basin are persistently growing, averaging approximately 210 at the beginning of April. Moreover, the permits trend is noticed as an all-time high as a total of 904 horizontal drilling permits were awarded last month. Nowadays, learning and analysing the current situation and predicting the future development become easier with early activity tracking, a new service recently launched by Rextag. Rextag's Pad Activity monitor (PAM) allows you to see well pad clearing, drilling operations, fracking crew deployment and completions with new data collected approximately every 2 days with the help of satellite imagery and artificial intelligence. While the increase in drilling will result in higher production, U.S. shale producers will have to overcome several hurdles including labor shortages and supply constraints.

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