The $7.6 billion sale of PDC Energy Inc. to oil giant Chevron closed Monday, and the new head of the merged companies’ Rockies unit aims to move quickly to blend the operations.
Shareholders at Denver-based PDC Energy, a major Colorado oil producer, overwhelmingly approved the all-stock transaction with San Ramon, California-based Chevron Corp. in a vote tallied Friday. The deal, announced in May, closed early Monday.
It combines PDC Energy’s 4,200-well oil and gas operations in northeast Colorado and western Texas with those of the international oil major.
Chevron, already one of the biggest oil producers in the Denver-Julesburg Basin in Colorado, becomes easily the state’s biggest oil company by adding PDC’s 244,000 barrels daily output here. PDC Energy also produces nearly 39,000 barrels of oil and gas from its wells in Texas’s Permian Basin.
The deal brings Chevron 275,000 acres of PDC Energy oil and gas operations in Colorado, mostly in Weld County and largely adjacent to where Chevron already operates in the basin.
“It just makes sense because there’s contiguous land,” said Kim McHugh, Chevron vice president in charge of its Rockies business unit. “The secured and permitted work going forward is there.”
Chevron named McHugh the new head of its Colorado business unit in spring, transitioning her from being head of onshore wells and completions. She spoke with the Denver Business Journal about the merger as it closed.
PDC Energy has a longer history operating in the northeast Colorado oilfields than does Chevron, and it knows how to operate safely and in partnership with local communities, McHugh said.
“One of the things that makes it great is they’ve been here a long time while, as Chevron, we’ve been here three years,” McHugh said.
Each company has about 500 employees in Colorado, with Chevron’s headcount slightly smaller. The businesses are culturally similar, operating like a family, she said.
The merger is expected to result in layoffs when redundant positions are eliminated, mostly at the corporate level. The top leadership at PDC Energy left the merged business when the deal closed.
Exactly how many other positions will be cut, and which ones, aren’t yet known, McHugh said.
McHugh will be meeting with PDC Energy and Chevron employees in Denver Monday. She plans to head Tuesday to the companies’ field offices.
Blending the two organizations in a way that’s best for the business and its new employees is the top priority, she said.
“We want to make this thoughtful and transparent going forward,” she said.
Her goal is to be able to tell PDC employees what the integration will mean for their specific position by late August and have the main changes needed to integrate the businesses done by some point in November, McHugh said.
At Chevron, employees with office jobs that can be done remotely or in an office are currently on a hybrid schedule, coming in to work in person three days per week.
PDC’s schedule has been similar, and that aspect of the integration should be smooth, McHugh said,
Employees of the combined companies will know what their role will be, from what physical office they’ll be based in, and what their work schedule is expected to look like.
The timetable may sound ambitious, McHugh said, but PDC Energy employees deserve to know what the merger will mean to them as quickly as possible.
McHugh has been through multiple acquisitions during her career, including one that brought her to work at Chevron.
This is her first experience in a merger of two operations so similar in size, she said.
She had a little trepidation about taking leadership of the company’s division in Colorado due to the state’s reputation for having difficult regulations for oil companies to meet.
But she has since learned about how Chevron and PDC Energy work with state regulators and local government permitting and seen what greenhouse gas emissions reduction targets Colorado has set out for the industry.
Now her trepidation is gone, McHugh said.
“The regulations in Colorado, they’re tough. They’re tight,” she said, “But the two companies are well on their way to meeting them.”
The low-carbon dioxide emissions production that Colorado requires is a direction Chevron is pursuing broadly.
“That fits very nicely inside our global goals,” she said.
But there’s still a lot to figure out, she said.
PDC Energy and Chevron each have downtown Denver office space, and jobs there will consolidated into one location.
PDC Energy has a field operations office in the Weld County town of Evans while Chevron has one in nearby Greeley. It’s unlikely both will be needed, McHugh said.
By month's end, the business should know generally what changes it will be making, and the goal is to have them in place in November.
One of the biggest benefits of the deal will be combining two organizations that have done things differently in the Denver-Julesburg Basin and being able to adopt the best practices of each, McHugh said.