Denver-based PDC Energy’s healthy share prices have allowed it to remain strong despite today’s low oil prices, leaving it in the perfect position to take advantage of opportunities.
As announced last week, the Colorado company will be shelling out $1.5 billion to purchase 57,000 acres in the Delaware Basin, an oil-rich area in southwest Texas that – given today’s low prices – has become one of the most profitable drilling areas in the nation.
“Diversifying outside the Rockies is a good thing,” says Bernadette Johnson of Ponderosa Advisors. “A lot of people are excited about the Delaware Basin.”
The enormous deal, expected to close in the fourth quarter, involves $915 million in cash and 9.4 million shares of PDC stock (valued at $590 million). The deal will bring PDC 21 horizontal wells (producing about 7,000 barrels of oil per day) and an average working interest of more than 90%. Two additional wells are under construction, and the company believes the property contains an additional 700 prime drilling locations with net reserves equivalent to 530 million barrels.
“This is truly a remarkable opportunity for PDC, its employees, and its shareholders,” says PDC CEO Bart Brookman (pictured above), noting that the deal will “add an extensive inventory of highly-economic drilling locations that complement our already strong portfolio.”
PDC currently owns 96,000 acres in the Denver-Juleburg Basin, where it operates three drilling rigs, and 65,000 acres of mineral rights in Ohio’s Utica Basin. In recent years, the company has focused most of its energies in the Denver Basin’s Wattenberg Field, where it is one of the biggest operators. More recently, Brookman has stated that PDC is focused on cutting costs and increasing efficiency.
In June, PDC traded 11,700 aces of mineral rights in Colorado with Houston-based Noble Energy Inc. in exchange for 13,500 acres of mineral rights near the Wells Ranch development area, which is located in the northeast corner of the state.