Chevron Corp. said it will buy driller PDC Energy Inc. in a $6.3 billion all-stock deal, allowing Chevron to expand its holdings in shale basins in Colorado and West Texas.

Chevron will pay $72 a share, a roughly 14% premium on a 10-day average based on May 19 closing prices, according to a statement Monday. PDC shareholders will receive 0.4638 shares of Chevron for each PDC share. The deal is expected to close by year-end, pending regulatory approval and PDC shareholder approval.

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

Oil and gas producers are flush with cash after raking in record profits over the past two years, leaving the US energy patch ripe for a takeover boom. Companies are looking to bulk up and consolidate, particularly in the Permian Basin of West Texas and New Mexico, the most prolific US shale play.

The total enterprise value of the Chevron-PDC deal including debt is $7.6 billion. Chevron said it expects the tie-up to add about $1 billion in annual free cash flow at $70 per barrel Brent oil and Henry Hub natural gas at $3.50 per thousand cubic feet. Morgan Stanley and Evercore advised Chevron, while JPMorgan advised PDC.

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