CVX - Chevron's PDC Energy deal a surprise may see regulatory scrutiny - analyst
2023-05-22 11:34:09 ET
Chevron's ( NYSE: CVX ) announced $72 a share all-stock deal for PDC Energy ( NASDAQ: PDCE ) is surprising news and it may see scrutiny from antitrust regulators, according to KeyBanc.
It's surprising that PDC Energy ( PDCE ) agree to sell at just an 11% premium vs. growing the company though acquisition, KeyBanc analyst Tim Rezvan wrote in a note on Monday.
"The modest premium and timing are surprising to us," Rezvan wrote. "We had questions about PDC Energy's inventory depth and ability to accelerate activity, but did not view the situation as dire."
The Federal Trade Commission is likely to do a deep look at the transaction as the list of "significant" operators in the DJ Basin drops to three from four with the deal and will include Chevron ( CVX ), Occidental ( OXY ) and Civitas ( CIVI ). Rezvan highlighted that the FTC recently was involved in a private transaction in Utah's Uinta Basin and ordered an EnCap fund to sell interests in Utah to maintain competition in a local refinery. The regulator is also involved in EQT's planned purchase of Appalachia operator Tug Hill.
The FTC "is likely to do a comprehensive review of concentrated operators in Colorado," Rezvan wrote.
Rezvan doesn't expect any other offers for PDC Energy ( PDCE ) as Occidental ( OXY ) would likely be the only other interested party, though they aren't likely to get into a bidding ware with Chevron ( CVX ) following the Anadarko situation.
Keybanc's Rezvan sees Civitas ( CIVI ) as the winner with the PDCE announcement as the company emerges as the last large, publicly traded independent operator left in the DJ Basin.
"Validation from Chevron about quality of the DJ Basin should provide near-term upside to CIVI shares," Rezvan added. "We not also note that Civitas has a sharply higher oil skew than PDC Energy (2023E oil of 45%, vs 32% for PDC<), which should be attractive to potential buyers."
Civitas ( CIVI ) shares rose 2% on Monday.
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Chevron's PDC Energy deal a surprise, may see regulatory scrutiny - analyst