Chevron (NYSE:CVX)
KeyBanc said antitrust authorities may look into Chevron’s (NYSE:CVX) announced $72 per share all-stock transaction for PDC Energy (NASDAQ:PDCE). Despite it, Chevron’s stock declined.
KeyBanc analyst Tim Rezvan said in a note on Monday that he was surprised to see PDC Energy agree to sell for merely an 11% premium rather than expanding the firm via acquisition.
We find the little premium and timing unexpected,” Rezvan said. PDC Energy’s inventory depth and capacity to speed up operations were things we worried about. Still, we didn’t think they were emergency situations.
Since the agreement reduces the number of “significant” players in the DJ Basin from four to three—Chevron, Occidental, and Civitas—the Federal Trade Commission is expected to conduct a thorough investigation of the merger. Rezvan brought up the recent involvement of the FTC in a private transaction in Utah’s Uinta Basin when the FTC mandated the sale of holdings in Utah by an EnCap fund to preserve competition in a nearby refinery. The regulator has also weighed in on EQT’s proposed acquisition of Tug Hill, an Appalachian operator.
Rezvan predicted that the FTC “will conduct a thorough review of concentrated operators in Colorado.”
Since Anadarko, Rezvan has yet to receive any further proposals for PDC Energy, and he does not anticipate any bidding wars between Chevron and Occidental.
PDC Energy CEO Bart Brookman stated on Monday’s conference call on the sale that the company’s board had followed a “rigorous” procedure.
On Monday’s conference, Brookman said, “So, the process was thorough.” That much, I can guarantee.
With the PDCE announcement, Civitas has emerged as the only major publicly listed independent operator in the DJ Basin in the eyes of Rezvan of Keybanc.
“Validation from Chevron about the quality of the DJ Basin should provide near-term upside to CIVI shares,” said Rezvan. Potential purchasers should be encouraged because Civitas has a far more favorable oil skew than PDC Energy (2023E oil of 45% vs. 32% for PDC).
Shares of Civitas gained 3% on Monday.
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