PDC Energy, Noble Energy agree to Wattenberg acreage trade

Analysts call deal a no-brainer and an easy home run for both companies

Denver, CO-based PDC Energy Inc. (Nasdaq:PDCE) has entered into definitive agreements with Noble Energy Inc. and certain affiliates (NYSE:NBL) to consolidate certain acreage positions in the Core Wattenberg field located in Weld County, Colorado.

Pursuant to the terms of the agreements, the trade includes leasehold acreage only, and does not include production or wellbores.  PDC expects to receive approximately 13,500 net acres from Noble’s Bronco area in exchange for approximately 11,700 net acres in the Wells Ranch area. According to the companies, the difference in net acres is primarily due to variances in net revenue interests.

"The anticipated acreage trade creates significant operational efficiencies and incremental value for both PDC and Noble by consolidating our operated acreage positions in this premier field," said Bart Brookman, PDC’s president and CEO.

Brookman spoke with OGFJ in May 2015 about its narrowed focus on two basins: the core Wattenberg and the Utica Shale in Southeastern Ohio.

Following the closing of the acreage exchange, Noble Energy's total Wells Ranch development area net acreage will increase by approximately 20% to approximately 78,100 acres and simplifies long term development of the DJ Basin, noted Charles J. Rimer, Noble Energy's senior vice president, US Onshore.  

The deal is a "no-brainer and easy home run" for both companies, Seaport Global Securities analysts said Thursday morning.

"NBL manages to increase leverage to its Wells Ranch focus area by ~20% (78.1K of its 361K net acres), and PDCE now establishes a much more blocky footprint in its Middle core area. The move should allow both companies to drill longer laterals with higher working interests and superior economics (note PDCE had previously pegged PV-10 on XRLs at up to 2x that of SRLs)," the analysts continued.

PDC Energy is reviewing the potential effects of the trade on its 2016 development plans. Subject, in each case, to title examination and other customary adjustments, the transaction is expected to close early in the fourth quarter of 2016.

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