US-based PDC Energy has signed a definitive merger agreement to acquire SRC Energy in an all-stock transaction worth $1.7bn.
The transaction value also includes SRC’s net debt of $685m as on 30 June.
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Following the transaction, PDC Energy expects total production of nearly 200,000boe/d for this year.
PDC Energy will have core assets in two of the premier US onshore basins, coupled with 36,000 net acres in the Delaware Basin.
As part of the deal, PDC Energy increased and extended its existing share repurchase programme from $200m to $525m.
The company plans to use nearly half of its estimated $800m free cash flow until the end of 2021 to buy back shares under the repurchase programme.
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By GlobalDataCommenting on the deal, PDC Energy president and CEO Bart Brookman said: “We remain committed to our core Delaware Basin acreage position and are confident the combined company with its multi-basin focus will be well-positioned to deliver superior shareholder returns.
“With an even more competitive cost structure, including peer-leading G&A and LOE per boe, the combined company will have the financial flexibility and sustainable free cash flow to return significant capital to shareholders and capitalise on additional growth opportunities.
“Importantly, this transaction will join two organisations grounded in strong core values and a shared commitment to responsible and safe operations.”
The combined entity is expected to drive significant corporate synergies.
The deal is expected to immediately enhance key 2020 metrics, including free cash flow for each share.
Subject to customary closing conditions and the satisfaction of certain regulatory approvals, the transaction is expected to close in the last quarter of this year.
In May, PDC Energy signed two definitive agreements to divest its gas and water midstream assets in the Delaware Basin for $310m.
