Chevron Corp. Monday offered a stock-and-debt transaction worth $7.6 billion to buy out 100% of Denver-based PDC Energy Inc.’s holdings, according to a news release.

The offer would fold PDC’s Colorado, Wyoming and Texas mineral assets into Chevron’s portfolio in exchange for Chevron stock.

“PDC’s attractive and complementary assets strengthen Chevron’s position in key U.S. production basins,” said Chevron Chairman and CEO Mike Wirth in a release. “This transaction is accretive to all important financial measures and enhances Chevron’s objective to safely deliver higher returns and lower carbon.”

Chevron officials said acquiring PDC’s 275,000 acres adjacent to Chevron’s existing operations in Colorado’s Denver-Julesburg Basin in Weld County, and 25,000 acres in Texas’ Permian Basin, will add 10% to the company’s proven reserves at a projected cost of less than $7 per barrel. That provides low break-even production and added development opportunities, according to the release.

Reuters reported the company has been under pressure on Wall Street to show it can keep expanding production after 2027 at its main shale holdings in the Permian Basin of West Texas and New Mexico.

Analysts in recent months have been questioning Chevron’s ability to counter worries that the company’s core U.S. shale properties are in decline following poor performance in the Permian basin of West Texas and New Mexico last year, according to Reuters.

“We expect these concerns on the Permian may linger,” Biraj Borkhataria, research analyst with RBC Europe, told Reuters.

According to industry experts, Colorado oil and gas is some of the cleanest in the world and is low in contaminants that contribute to ozone formation in the Denver Metro/Front Range ozone nonattainment area.

“The acquisition makes sense and is a good fit for the basin, given the two companies’ land position and approach to safely developing the affordable, reliable energy Coloradans need,” said Colorado Oil and Gas Association President and CEO Dan Haley in an email statement. “Even with the political and regulatory headwinds in Colorado, it’s essential that as an industry we remain focused on improving operations, reducing emissions, and leading the country and world in technology and innovation.”

President Joe Biden criticized American oil companies last year for not increasing output rapidly enough after the 2022 fuel price spikes. Biden tried to stabilize gas prices with a drawdown from the U.S. Strategic Petroleum Reserve of “unprecedented size and scope to respond to the energy market disruptions posed by Russia’s invasion,” according to a White House fact sheet.

The SPR went from a peak of 726.5 thousand barrels in 2010 to 371.5 thousand barrels in February 2023, according to the U.S. Energy Information Administration.

The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close by the end of the year. The acquisition is subject to PDC shareholder approval and regulatory approvals.

The deal will hike Chevron’s capital spending by about $1 billion per year, raising its annual range to $14 billion to $16 billion through 2027, the company said.

Chevron stock closed at $155.23 on May 19. The oil giant, second largest in the U.S., is offering 0.4638 shares of Chevron stock per share of PDC stock. The per-share exchange includes a 14% premium for PDC shareholders.

“The combination with Chevron is a great opportunity for PDC to maximize value for our shareholders. It provides a global portfolio of best-in-class assets,” said Bart Brookman, PDC president and CEO. “I look forward to blending our highly complementary organizations, and I’m excited that PDC’s assets will help propel Chevron toward our shared goal for a lower carbon energy future.”

Chevron is one of the top producers in the Denver-Julesburg Basin after its $13 billion acquisition of Noble Energy in 2020.

Reuters contributed to this story.