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PDC Energy to buy SRC Energy for $971 million

Christian Fernsby |
PDC Energy and SRC Energy announced they have entered into a definitive merger agreement under which PDC will acquire SRC in an all-stock transaction valued at approximately $1.7 billion, including SRC’s net debt of approximately $685 million as of June 30, 2019.

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Under the terms of the agreement, SRC shareholders will receive a fixed exchange ratio of 0.158 PDC shares for each share of SRC common stock, representing an implied value of $3.99 per share based on the PDC closing price as of August 23, 2019.

The transaction, which is expected to close in the fourth quarter of 2019, has been unanimously approved by each company’s board of directors.

Materially increases PDC’s scale with a consolidated, contiguous Core Wattenberg leasehold position of approximately 182,000 net acres located entirely in Weld County and pro forma second quarter 2019 total production of nearly 200,000 barrels of oil equivalent (“Boe”) per day (166,000 Boe per day in the Wattenberg).

On a pro forma basis, the combined company is the second largest producer in the DJ basin.

Coupled with its approximate 36,000 net acre Delaware Basin position, the Company will have core assets in two of the premier U.S. onshore basins.

Materially enhances free cash flow profile and enhances ability to return additional capital to shareholders.

Pro forma free cash flow is estimated to be approximately $800 million from the third quarter of 2019 through year-end 2021, assuming $55 per barrel NYMEX.

PDC has increased and extended its existing share repurchase program from $200 million to $525 million, with a target completion date of year-end 2021.

Year-to-date, PDC has repurchased $125 million of its shares and plans to utilize approximately 50 percent of the estimated $800 million of free cash flow in the same period to complete the remaining $400 million repurchase program.

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